The news that the start of the Brexit procedure will be triggered on 29 March sent the exchange rate from £1 to €1.154 to £1 to €1.150.
This follows a week where the pound made significant gains, as anxiety in the run up to the Dutch elections saw the euro fall.
There were worries that Geert Wilders, the anti-EU founder and leader of the Party for Freedom, would win more seats than usual, potentially leading to the Netherlands holding its own Brexit-style referendum.
One member of the Monetary Policy Committee voted to hike UK interest rates
However, although Mr Wilders’ party did increase its number of seats, he failed to win a majority.
Mark Rutte’s People’s Party for Freedom and Democracy were victorious with 33 seats and 21.2 per cent of the vote, which helped ease Eurozone nerves and strengthen the currency.
However, despite the pound’s slight dip, sterling may strengthen again based on the February Consumer Price Index figures released on Tuesday.
If it turns out inflation increased at a faster pace than expected last month, the Bank of England could be forced to tighten UK monetary policy again.
Last week at a Bank of England meeting, one member of the Monetary Policy Committee voted to hike UK interest rates.
While Kristin Forbes was the only one to vote for this measure and UK policy stayed the same temporarily, her decision led investors to believe others may soon follow suit, bolstering the pound.
Writing in the Telegraph, she said: “This softening…should only be moderate, due to support from resilient consumer confidence, solid house prices, low unemployment, and easy access to cheap credit.
“There are risks consumers could pull back more sharply – but these are still just risks.”
February’s retail sales are also released next week and will indicate whether or not the UK’s retail sector has slowed.
Fresh political concerns in the EU could also affect the exchange rate next week.
Polls are shifting in the run up to the French elections, with concerns of a win for far-right National Front leader Marine Le Pen impacting on the euro.
Le Pen has pledged to hold a referendum on whether France should stay in the EU or not should she win the election.
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