Covid-19 Worries Unable to Prevent Pound Euro (GBP/EUR) Exchange Rate Gains
The Pound Sterling to Euro (GBP/EUR) exchange rate continued to push higher heading into the weekend in spite of the economic shadow still cast by the Covid-19 crisis.
News the Boris Johnson had contracted the virus saw the mood towards Pound Sterling (GBP) temporarily dip, however.
The possibility of greater political disruption unnerved investors as they weighed up the ultimate impact of the pandemic and its likely effect on the UK economy.
Even so, as February’s car production saw a smaller dip than forecast this helped to keep a floor under GBP exchange rates.
After seeing a sustained bout of weakness in the last week the Pound was able to hold its ground, with the GBP/EUR exchange rate having encountered technical resistance after hitting its lowest level in more than a decade.
Smaller Decline in French Confidence Fails to Shore up Euro
While French consumer confidence saw a smaller decline than forecast in March this failed to offer any particular encouragement to the Euro (EUR).
Although consumers demonstrated greater resilience in the face of the current disruption the Eurozone economy still faces significant headwinds.
With both Spain and Italy still struggling under the weight of fresh Covid-19 cases markets remain wary of the possibility for a greater deterioration in growth across the currency union.
Even with the European Central Bank (ECB) standing ready to deliver further support to the Eurozone economy investors struggled to find incentive to buy into the Euro today.
Euro Set for Further Losses on Eurozone Business Confidence Decline
Fresh weakness could be in store for the Euro on Monday with the release of March’s Eurozone business confidence index.
Investors expect to see a fresh deterioration in sentiment as a result of the worsening impact of the pandemic, adding to the bearish outlook of the currency union.
If sentiment weakens across the board this could leave EUR exchange rates on the back foot, fuelling bets that economic weakness may deepen in the second quarter.
As long as the Eurozone appears on track to experience a significant loss of momentum in the first half of 2020 the potential for Euro gains may well prove limited.
A sharp dip in the headline German consumer price index could offer some reassurance to the single currency, though, as weaker inflation could help to cushion consumers from the economic fallout of Covid-19.
UK Housing Market Weakness Forecast to Weigh on Pound
With the UK housing market now at an effective standstill any signs of weakness in the latest Nationwide housing price index may weigh on the GBP/EUR exchange rate.
While a sharp economic recession appears locked on for the UK in the months ahead a weaker showing here could still put a dampener on the Pound.
The release of February’s mortgage approvals and consumer credit figures may also dent GBP exchange rates.
A fresh decline in lending, even before the major impact of the Covid-19 crisis began to unfold, could add to worries over the economic outlook, leaving the Pound on a weaker footing against its rivals.