Business Currency News: Brexit Uncertainty Drives Volatility in GBP, Coronavirus Panic Strengthens USD

GBP/EUR Exchange Rate: Sterling Spikes to Six-Week High Following BoE Rate Decision

The Pound to Euro (GBP/EUR) exchange rate roared higher through the second half of last week in response to the Bank of England’s (BoE) first rate decision of 2020.

Ahead of the decision GBP investors had priced in a 50% chance of the BoE opting for an immediate rate cut in light of some lacklustre UK economic data at the end of 2019.

However, the bank ultimately left interest rates on hold last month, propelling the GBP/EUR exchange rate to its highest levels since mid-December.

But the GBP/EUR exchange rate failed to consolidate those gains this week, plummeting in the first half of the session in response to renewed Brexit uncertainty.

Looking ahead, GBP/EUR may face additional pressure over the coming week as the UK’s preliminary GDP print for the fourth quarter is expected to show that the UK economy stagnated at the end of 2019.


GBP/USD Exchange Rate: Pound Slumps to One-Month Low on Brexit Uncertainty

After accelerating at the end of last week following the BoE rate decision, the GBP/USD exchange rate did a 180 at the start of this week’s session amid renewed fears of a no-deal Brexit.

This came in response to a bullish speech from Boris Johnson as the UK made its first steps outside of the EU this week, calling for a Canada-style free trade deal with the EU, which will not require the UK to adopt EU rules.

Johnson threatened he would be willing to walk away from talks if such a deal could not be struck, reigniting fears that the UK could face a no-deal Brexit at the end of 2020 and driving the Pound sharply lower.

Since then we have seen the GBP/USD exchange rate mount a modest recovery on the back of some stronger-than-expected UK PMI figures, but with Brexit looming large any additional upside in Sterling is likely to be limited.


USD/GBP Exchange Rate: Coronavirus Fears Bolster the Safe-Haven US Dollar

While the USD/GBP exchange rate suffered a setback last week following the strong pick-up in the Pound post-BoE, the losses were capped by continued demand for safe-haven currencies like the US Dollar.

This comes as markets grow increasingly jittery regarding the coronavirus outbreak in China and its potential impact on the global economy.

This left the USD/GBP exchange rate well positioned to rally on Monday amidst widespread GBP weakness and on the back of a surprise rebound in US manufacturing growth last month.

Still to come this week we have the publication of the first US payrolls report of the year. The highly influential release may turbocharge the US Dollar if the US workforce continued to expand at a robust pace and average earnings rebounded from a one-year low.


EUR/USD Exchange Rate: Underwhelming Eurozone GDP Limits Upside in the Euro

Trade in EUR/USD has been mixed over the last week, with the Euro’s rally at the end of January being undermined somewhat by a disappointing Eurozone GDP release.

This reveal the Eurozone economy expanded by just 0.1% in the last quarter of 2019, following shock contractions in both France and Italy at the end of the year.

The underwhelming GDP figures left EUR/USD vulnerable to losses at the start of February as the single currency also fell victim to renewed Brexit uncertainty and a dire retail sales print.

Looking ahead, the Euro may continue to face headwinds in the coming days, depending on the performance of Germany’s latest industrial data.

Matthew Andrews

Contact Matthew Andrews