Pound Sterling to Euro (GBP/EUR) Exchange Rate Recovers from Decade-Worst amid Stimulus Hopes

Pound to Euro Exchange Rate Recovers Most Weekly Losses

Update 16:30 GMT 20/03/2020:

Markets spent much of Friday’s session calming slightly from a chaotic week. As a result, the Pound Sterling to Euro (GBP/EUR) exchange rate continued to climb.

The Pound (GBP) is still benefitting from the Bank of England’s (BoE) impressive stimulus plans. On top of this, hopes for ramped up fiscal stimulus from the UK government helped with the Pound’s rebound.

As a result, GBP/EUR has regained most of its significant weekly losses. GBP/EUR briefly edged above the key level of 1.10 but is trending in the region of 1.09 at the time of writing.

GBP/EUR is looking likely to close the week just over two cents below the week’s opening levels after recovering over four cents from the week’s decade lows.

(Originally published 11:15 GMT 20/03/2020)

Pound to Euro Exchange Rate Climbing in Continued Reaction to Bank of England 

Following days of sharp losses, the Pound Sterling to Euro (GBP/EUR) exchange rate has rebounded since last night. Investors have been buying the Pound (GBP) from its lows thanks to the latest stimulus from the Bank of England (BoE). 

GBP/EUR is still trending lower though. When markets opened this week, GBP/EUR was at the interbank level of 1.10. GBP/EUR is currently trending about a cent lower than this, in the interbank region of 1.09. 

Still, GBP/EUR has seen a notable recovery from the lows seen in the middle of the week. In the early hours of Thursday’s session, GBP/EUR floundered near a low of 1.05 – the worst level for the pair in over a decade. 

This means that GBP/EUR has recovered four cents since yesterday. This has been thanks to Bank of England news, but also the pair rebounding from significant movement and the Euro’s recent strength evaporating. 

Pound (GBP) Exchange Rates Rebound on Rising Stimulus Optimism 

The Pound (GBP) was suffering a huge selloff for much of this week. However, since yeterday the British currency has been rebounding from its worst levels. 

Investors are buying the Pound as it is cheap, but its gains were also spurred by the Bank of England’s (BoE) latest policy action. 

The BoE made an emergency announcement, cutting UK interest rates to a record-low 0.1%. This, as well as an expanded quantitative easing (QE) scheme, was well-received by markets and bolstered optimism around stimulus measures. 

The news softened Sterling’s downwards pressure. According to Neil Jones, Head of Hedge-Fund FX Sales at Mizuho, speaking yesterday: 

‘Liquidity is a lot better in Sterling than it was yesterday. There has been buying and selling in both directions. As opposed to yesterday when all you had was a near vertical downward line,’ 

On top of the impressive Bank of England news, Pound investors are also hopeful for further fiscal stimulus measures from the UK government. Chancellor Rishi Sunak is expected to announce a new stimulus package to protect jobs soon. 

Euro (EUR) Exchange Rate Rally Softens as Markets Calm from Week’s Chaos 

The global coronavirus pandemic gave markets yet another huge shock this week. 

However, the Euro’s (EUR) bullish performance started to slow and towards the end of the week showed more signs of calming. 

Part of the reason markets have begun to show signs of calming has been due to the ramped up stimulus measures taken across the globe this week. For the European Central Bank, that came on Wednesday night. 

In what analysts are calling ECB President Christine Lagarde’s ‘whaetever it takes moment’, the bank announced a massive stimulus package. 

According to Lee Sue Ann from UOB: 

‘In all, we think the ECB has made a fairly aggressive move here… Whilst we think that these monetary policy measures will be better complemented with even more fiscal measures; this is, for now, definitely Lagarde’s “whatever it takes” moment.’ 

Pound to Euro (GBP/EUR) Exchange Rate Could Climb if Stimulus Continues to Impress 

The Pound’s (GBP) support has been bolstered by market optimism over the Bank of England’s (BoE) new policy stimulus. With markets anticipating new fiscal stimulus from governments now, Sterling could climb higher. 

UK Chancellor Rishi Sunak has indicated that further support for jobs is being prepared. The government is being urged to help with wages. More news over Sunak’s stimulus plans are expected to be announced today. 

If the stimulus boosts hopes that Britain’s economy can be supported even amid the potential of lockdown in the coming weeks, the Pound may steady further. 

However, the British currency is still highly volatile amid the worsening coronavirus pandemic. The Euro (EUR), on the other hand, is being seen as relatively safe despite the situation worsening in Italy. 

As a result, the Pound to Euro (GBP/EUR) exchange rate’s potential to advance may be limited even if stimulus improves market sentiment. 

Josh Jeffery

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