Pound to Euro (GBP/EUR) Exchange Rate Struggles to Sustain 3-Cent Recovery as Coronavirus Fear Persists

Pound to Euro Exchange Rate Slumps Again as Pound Seen as Risky

Update: 16:49 GMT 23/03/2020:

After holding its ground for most of the day, the Pound Sterling to Euro (GBP/EUR) exchange rate slipped this afternoon.

Concerns over the impact of the coronavirus in Britain continued to worsen and hit Sterling (GBP). Meanwhile, the Euro (EUR) was weakened by rising hopes of fiscal stimulus across the EU.

Even more major UK businesses are shuttering due to the virus, and high street banks are winding down activity to a slow.

Both Pound and Euro investors eagerly await further fiscal stimulus measures from UK and EU governments.

(Originally published 09:35 GMT 23/03/2020)

Pound to Euro Exchange Rate Steadying despite Covid-19 Dominating Outlooks 

Towards the end of last week, the Pound Sterling to Euro (GBP/EUR) exchange rate saw a solid rebound from its worst levels in a decade. Investors bought the Pound (GBP) back from lows thanks to new UK stimulus measures to combat the coronavirus. 

After opening last week at the interbank level of 1.10, GBP/EUR initially plummeted. The Pound’s continued weakness left GBP/EUR falling to a low of 1.05 – the worst level for the pair in over a decade. 

However, towards the end of the week the Pound rebounded. Investors bought the currency back from its cheapest levels while the Euro’s (EUR) appeal softened. By the end of the week, GBP/EUR had recovered around three cents. 

At the time of writing on Monday, GBP/EUR remained a little steadier following last week’s rebound. The pair is trending in the interbank region of 1.08. 

Pound (GBP) Exchange Rates Steady in Anticipation for Further Stimulus 

Last week saw the Pound (GBP) finally claw back some losses. Investors bought the cheap Pound as the Bank of England (BoE) and UK government introduced new stimulus to protect Britain’s economy from the coronavirus pandemic. 

The Bank of England (BoE) cut interest rates to a record-low 0.1%. On top of this, the bank made aggressive quantitative easing (QE) plans which impressed investors. 

UK Chancellor Rishi Sunak has also ramped up domestic fiscal stimulus. The stimulus packages aim to protect jobs, employees and wages as the pandemic worsens. 

Today, Sunak is under pressure to offer more for the self-employed. This could boost the Pound. 

However, Sterling is also being pressured by continued closures of major businesses and economic slowdown. The fear of a deep recession is keeping the Pound from recovering any further. 

Euro (EUR) Exchange Rates Driven by Rivals amid Lack of Government Stimulus 

The Euro’s (EUR) strong appeal finally slowed last week. This was due to a surge in demand for its biggest rival, the US Dollar (USD). The Euro is now benefitting less from safe haven demand than it was a couple of weeks ago. 

A lack of optimistic news in the Eurozone is making investors hesitant to buy the Euro again. 

Last week’s massive stimulus package from the European Central Bank (ECB) did give the Euro a boost. However, analysts fear the ECB can only do so much to protect the Eurozone without coordinated efforts from EU governments. 

According to Isabel Schnabel, Executive Board Member at the ECB: 

‘The ECB can provide the banks with liquidity, 

But that doesn’t necessarily mean that banks really lend to companies in trouble because of the virus. That’s where the state comes in. It can support the economy, for example by giving credit guarantees.’ 

Pound to Euro (GBP/EUR) Exchange Rates Await Further Government Action on Pandemic 

Both the Pound (GBP) and Euro (EUR) are currently seeing mixed, damp movement. Investors are hesitant to buy either currency, instead waiting for more stimulus news. 

UK Chancellor Rishi Sunak is still expected to ramp up fiscal stimulus for Britain. How his stimulus measures are taken is likely to drive the Pound’s movement in the coming sessions. 

It will be a similar story for the Euro. With the ECB having already delivered a huge stimulus package, eyes are now on various Eurozone and EU governments. If the EU ramps up fiscal stimulus plans, the Euro will find some support. 

The Euro may also find support on safe haven demand however. If the US Dollar (USD) weakens again, the Euro will strengthen and the Pound to Euro (GBP/EUR) exchange rate could see fresh losses. 

Josh Jeffery

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