Pound Sterling Euro (GBP/EUR) Exchange Rate Falls on Lack of Lockdown Easing Information
UPDATE: The Pound Sterling Euro (GBP/EUR) exchange rate slumped by around -0.2% this afternoon, leaving the pairing trading at around €1.1453.
The Pound edged lower against the Euro this afternoon as Britain did not show any signs of easing the country’s lockdown. This comes despite other European countries laying out plans to re-open their economies which boosted risk appetite.
With the UK set to have one of the worst coronavirus death tolls in Europe, the government has insisted it is too early to talk about easing the lockdown. Boris Johnson’s government has also said that it will not review the social distancing guidelines until 7 May.
Rabobank senior FX strategist Jane Foley noted the lack of information from the government about lifting the lockdown was a downside risk for Sterling.
Foley added:
‘I think that there’s some concerns that […] we have been fairly rudderless, and that compared with some other countries there seems to be a delay in the UK in coming forward with a plan with respect to shutdowns.
‘Coupled with the confusion about Brexit and the fact there is no indication from the government that they want to extend the transition phase there is more uncertainty potentially on the way.’
Pound Sterling Euro (GBP/EUR) Exchange Rate Slumps despite Weak Eurozone Services Confidence
The Pound Sterling Euro (GBP/EUR) exchange rate slumped by around -0.4% today, leaving the pairing trading at around €1.1434.
The Pound struggled to make gains against the Euro this morning despite making earlier gains on moves to reopen economies which encouraged traders to move towards riskier assets.
Sterling has been closely correlated with riskier assets, giving the currency a boost during yesterday’s session.
However, there was caution ahead of today’s US Federal Reserve meeting and tomorrow’s European Central Bank (ECB) meeting which capped GBP gains this morning.
Meanwhile, data revealed that Eurozone economic confidence slumped further than expected in April. This was the worst-ever fall as economic activity grounded to a halt due to the coronavirus pandemic.
The European Commission’s survey showed that the largest fall was in the services sector which generates around two-thirds of the bloc’s GDP.
Sterling (GBP) Falls as UK-EU Trade Agreements at Standstill
Meanwhile, on Tuesday reports revealed that negotiations between the UK and European Union were at an impasse.
According to officials in Brussels, talks about post-Brexit trade agreements are at a standstill over disagreements about the coronavirus pandemic.
This left the Pound under pressure, causing it to suffer losses against the single currency.
According to one diplomat from the EU:
‘We are at an impasse. There are plenty of minor technical details where we could find solutions. But on the fundamental goals each side is trying to achieve – the differences are enormous. Things cannot move without a political push. And it’s missing.’
Pound Euro Outlook: Fed and ECB Meetings in Focus
Looking ahead, the Pound (GBP) could edge higher against the Euro (EUR) following the US Federal Reserve’s monetary policy meeting.
If the Fed provide the US economy with further stimulus due to coronavirus, it will boost risk appetite and support Sterling.
Meanwhile, traders’ attentions will turn to Thursday’s European Central Bank (ECB) monetary policy meeting.
Markets are also expecting the ECB to provide the bloc with further stimulus to help keep it afloat during the pandemic. If risk sentiment rises following the release of the bank’s meeting, the Pound Euro (GBP/EUR) exchange rate will edge higher.