Peggy's father Keanu was an employee of Phil Mitchell (whom is Peggy's grandfather). Phil and his wife Sharon's relationship starts to deteriorate due to Phil's bullying behaviour and her boredom with simply being Phil's stay at home wife, and finds herself becoming attracted to Keanu, however Sharon does not know that he is only 19 years old. After Phil leaves to visit his brother Grant in Spain, Sharon invites Keanu over to the house where they kiss and have sex.
Keanu then wants to become a taxi driver but is too young, Sharon discovers he's only 19, younger than she believed him to be. The age gap unsettles Sharon, and she ends their affair, however, they later reconcile. Sharon starts receiving threatening text messages from an unknown person regarding their affair. At a party, Sharon and Keanu are seen kissing by Keanu's mother Karen who demands they stop the affair. Sharon is then shocked to find out it has been Louise sending her text messages, she manages to persuade Louise she has misunderstood everything and successfully persuades her to drop the accusation before ending the affair with Keanu once more. Keanu asks to remain friends with Sharon and she initially agrees, but when a goodbye kiss between them turns into sex, she admits that things will be too weird between them and tells him they should stay away from each other. However, they reignite their affair again weeks later. Sharon then tells Keanu to move on for good and he has sex with Louise. Sharon returns two months later to witness Keanu and Louise kissing, now in a relationship, which she is obviously jealous of. Keanu confronts her in the Vic toilets, saying he still has feelings for her, but Sharon denies she feels the same. They then reconcile and continue to have an affair behind Phil and Louise's back. This leads to Louise and Sharon becoming pregnant and after working out the dates, Sharon realises Keanu is the father. Louise gives birth to Peggy in December and her half brother Kayden is born in February.