Pound to Euro Exchange Rate Benefits from Brief Market Optimism
Following last week’s modest tumble, the Pound Sterling to Euro (GBP/EUR) exchange rate has edged higher today. Sterling (GBP) is gaining on a riskier market mood, but the currency’s gains may be limited.
Last week, GBP/EUR opened the week at the level of 1.1111 and briefly edged higher to a half-month-high of 1.1131. GBP/EUR then spent most of the week tumbling lower though, and the pair ultimately closed the week at the level of 1.1076.
Since markets opened this week, GBP/EUR has been trending with an upside bias as Sterling attempts to benefit from market sentiment.
GBP/EUR has been able to rebound to around 1.1100, but the pair’s potential to hold this ground and see further gains.
Pound (GBP) Exchange Rate Appeal Limited as ‘Second Wave’ Coronavirus Fears Rise
The Pound briefly saw a jump in demand last week. Investors reacted to news that the Bank of England’s (BoE) 2020 economic forecasts were not as dire as they had been in May.
However, the Pound’s benefit from this news was limited. Sterling was sliding again towards the end of the week, as concerns about the possibility of negative interest rates in the UK weighed on the currency’s outlook alongside Brexit jitters.
On top of this, global coronavirus ‘second wave’ fears are hurting the Pound outlook as well.
As cases rise again worldwide, Britain’s lockdown easing has already been delayed. There is rising speculation that Britain could see new lockdown measures in the coming month. According to Yohay Elam, Analyst at FXStreet:
‘With coronavirus raising its ugly head in Europe, is Britain also seeing a similar increase? So far, the UK’s recent figures are better, but any increase would raise the chances of a lockdown on London – perhaps the most significant threat to the recovery.’
Euro (EUR) Exchange Rates Pressured as Rivals Attempt Recovery
Investors have found the Euro (EUR) broadly appealing in recent months. The shared currency outlook has been bolstered by the Eurozone’s handling of the coronavirus pandemic, as well as rising hopes for the Eurozone economy to weather the pandemic.
However, investors are hesitant to keep buying the Euro even higher following its long period of gains.
As a result, the shared currency is slipping today. Investors are opting to buy the Euro’s rivals, including the Pound and US Dollar (USD), from their cheapest levels.
Trade tensions and strong US data is supporting the US Dollar (USD). As USD is EUR’s biggest rival this is weighing on the Euro.
Pound to Euro (GBP/EUR) Exchange Rates Await Job Market Data
GBP/EUR may be rebounding today, but the pair’s potential for gains and to hold gains is likely to be limited.
Pound investors are awaiting tomorrow’s key UK job market report. The Bank of England (BoE) continues to express concern about the health of Britain’s job market amid the coronavirus.
As a result, if UK jobs are stronger than expected, investors may have more optimism about Britain’s economic outlook. On the other hand, poor UK data could weigh heavily on Sterling’s outlook.
The Eurozone outlook remains fairly strong overall, but it could weaken if this week’s Eurozone data or EU coronavirus developments concern investors.
Eurozone confidence data from ZEW is due tomorrow, but Friday’s Eurozone growth and employment stats are more likely to influence the shared currency’s outlook.
Of course, coronavirus plans from domestic governments could also influence the Pound to Euro (GBP/EUR) exchange rate.
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