GBP/EUR Exchange Rate Rises as EU Fails to Establish Coronabonds
The Pound to Euro (GBP/EUR) exchange rate is looking to refresh a two-week high this morning as members of the EU remain split over their fiscal response to the coronavirus.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1353, up roughly 0.4% from this morning’s opening levels.
Euro (EUR) Slumps on Coronavirus Fears and Lack of Cohesive Response from the EU
The Euro (EUR) remains on the back foot this morning amidst ongoing concerns over Europe’s coronavirus crisis.
While there has been some sign of the curve flattening in a handful of countries in recent days, coronavirus cases and deaths continue to rise throughout Europe at an alarming rate, with France and Spain both announcing a record number of mortalities on Wednesday.
With the outbreak still appearing to be some way from peaking, many countries have announced that they will be extending their lockdowns. Fueling further concerns about the impact on the Eurozone already fragile economy.
This has not been helped by the EU’s lack of cohesion in its fiscal response to the coronavirus.
As the hardest hit by the disease so far, France, Italy and Spain have been pushing for the issuing of so-called ‘coronabonds’, a common bond issued by all Eurozone states to ensure they can secure the necessary funds to limit the economic damage caused by widespread lockdowns.
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However, some countries, most notably Germany and the Netherlands are resistant to the idea of the coronabonds, something which appears to be undermining the unity of Eurozone at the cost of the Euro.
Thu Lan Nguyen, FX Strategist at Commerzbank comments:
‘We all know that the strength of a relationship can be severely tested during times of crisis. This is currently very obvious in the EU, and the Euro is not taking it well. There is no agreement about how to support the member countries most badly affected by the virus.’
Pound (GBP) Capped by Coronavirus Stats
At the same time, while the Pound (GBP) has been able to advance against a weakened Euro (EUR), Sterling is struggling to replicate this elsewhere, being mostly rangebound against most of its other peers.
This comes as the latest coronavirus statistics from the UK paint a gloomy picture, with the UK death toll jumping by 31% on Wednesday, while the number of new infections continues to accelerate.
GBP investors speculation the deteriorating situation could push the UK government to introduce stricter restrictions in the coming days.
GBP/EUR Exchange Rate Forecast: UK Services PMI to be Revised Lower?
Looking ahead, expect to see the Pound to Euro (GBP/EUR) exchange rate remain highly sensitive to coronavirus developments through to the end of the week.
Also influencing the pairing is likely to be March’s final services PMI for both the UK and Eurozone.
In the UK we may see the final figures revised lower as Friday’s reading will also take into account the period since the UK government imposed a countrywide lockdown, shutting all non-essential shops and further limiting business activity in the services sector.
Meanwhile, the Eurozone PMI release is expected to confirm growth in the bloc’s private sector collapsed to a record low last month, likely keeping the euro under pressure.