graficaMarch was a tough month for the pound Sterling to euro exchange rate. The pairing tumbled towards the end of February, hitting its lowest levels in three months, but the last few weeks saw Sterling slowly recovering its losses.

Things really picked up at the end of March, when the UK and EU surprised markets by publishing a joint draft Brexit agreement, and UK wage growth and employment data beat forecasts, improving the outlook for the UK’s consumer-driven economy.

But what does the future hold for GBP/EUR?

April starts with the next round of UK Markit PMIs, which measure activity in the manufacturing, construction and services sectors.

The latter is the most important, as it accounts for over 75% of the UK’s total economic output each year. Weakness in the services PMI would undermine the GBP/EUR exchange rate, while strength here would help to alleviate fears that the UK economy is slowing.

The month closes with the first official estimate of growth during the first quarter of 2018, which could have a significant impact upon the pound, as the economy has been trudging along since Brexit, walking a fine line between recovery and weakness.

Of course, no forecast for the pound would be complete without a mention of Brexit. Negotiations regarding trade could begin in April, and this could bring a whole host of new issues regarding the kind of relationship the UK has with the EU once Brexit is completed.

As well as all the usual monthly data set for release from the Eurozone during April, politics could play a large part in deciding EUR movement over the coming weeks.

The evolving trade dispute between the US and the European Union is likely to have an impact upon exchange rates, after the former levied tariffs on steel and aluminium imports as part of President Donald Trump’s ‘America First’ agenda.

If it seems that the EU will be forced to retaliate with tariffs of its own, fears that the world is on the brink of a global trade war will likely weigh on the euro.

Rounding off the month will be the European Central Bank (ECB) monetary policy meeting concluding on 26th April.

The Eurozone economy continues to send strong signals, but consumer price growth remains firmly below the ECB’s target of just below 2%. The euro is therefore likely to weaken if policymakers conclude that inflation isn’t showing any signs of picking up, while suggestions that further price growth is in the pipeline would boost EUR exchange rates.

Barring a fleeting spike higher, the GBP/EUR exchange rate is currently trending around its highest levels since mid-June 2017. Will Brexit positivity and the hopes of monetary tightening in May be enough to push it even higher?