Last week, due to political turmoil in France, the euro faced significant selling pressure.

This began with a vote of no confidence in Prime Minister Michel Barnier, who had previously used his special powers granted by the constitution to push for a budget to be passed in the highly divided National Assembly.

With Barnier's defeat in the vote of no confidence, the French government subsequently collapsed, plunging the eurozone's second-largest economy into political turmoil.

A series of dovish remarks by ECB policymakers have intensified the euro's predicament, consolidating the European Central Bank's bet on a rate cut in December and sparking speculation that the ECB may cautiously maintain monetary policy in the coming months.

Last week, the pound faced a difficult start after the latest manufacturing PMI in the UK was unexpectedly lowered. Due to the UK Retail Association's report of a slowdown in consumer activity in November, the sentiment towards the pound remained sluggish last Tuesday.

Supported by the upward revision of the UK services PMI, the pound strengthened in mid week trading last week. The UK services PMI avoided a contraction of private enterprises last month.

British Prime Minister Keir Starmer outlined a series of "milestones" for the UK government in his speech, and the market generally holds a positive attitude towards his speech. As he outlined plans to drive several major economic infrastructure projects in the coming years, this positive attitude helped support the sentiment of the pound.

As we enter this week, with the European Central Bank announcing its latest interest rate decision, we may see a positive trend in the GBP/EUR exchange rate.

In addition to the widely expected 25 basis point interest rate cut, euro investors will closely monitor the forward guidance of the European Central Bank. If the European Central Bank hints at continuing to relax its monetary policy, the euro may plummet.

Meanwhile, pound investors will focus on the latest GDP data from the UK this week. If economic growth continues to shrink, the pound may face headwinds later on.

EUR/GBP daily chart