GBP/EUR & EUR/GBP Weekly Forecast

Despite a lack of fresh supportive factors for Sterling trade last week, the GBP/EUR exchange rate touched a new monthly high earlier today and could see even further gains depending on Eurozone political developments. Due to broad Pound weakness, last week saw GBP/EUR slip slightly from €1.1439 to around €1.1380. This week though, Euro weakness has already helped the pair to recover those losses and then some.

GBP/EUR touched on a one-month-high of 1.1497 and with a lack of drivers in Pound trade, the GBP/EUR exchange rate has been influenced largely by Italian political news causing high volatility in Euro trade this week. The latest developments have indicated that Italy could see fresh elections later this year, worsening ‘Italexit’ concerns. While the Euro’s broad weakness has made it easier for the GBP/EUR exchange rate outlook to rise, Britain’s domestic outlook is still full of uncertainties which is likely to limit the Pound’s gains against the Euro.

This could be a big week for the Euro, but depending on how things go Eurozone political uncertainty could persist in the mid to long-term too. Of course, any notable political developments in Italy or Spain could drive Euro exchange rates. Currently, the Euro’s weakness is being caused by market uncertainty about the political futures of these nations. As a result, if things develop to make the political outlooks more firm and steady instead, the Euro would recover. If the prospect of another Italian election becomes less likely, or if Spain’s Prime Minister Rajoy survives the upcoming ‘no-confidence’ vote, the Euro would become more appealing and likely push GBP/EUR lower. However, if Italian elections look more likely or if Rajoy’s position is affected by the no-confidence vote the Euro could see even further weakness. This politically inspired weakness would likely be even more influential than upcoming Eurozone economic data releases.

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