Pound Sterling Euro (GBP/EUR) Exchange Rate Muted as Pompeo Blames China for Pandemic
UPDATE: The Pound Sterling Euro (GBP/EUR) exchange rate remained flat on Monday afternoon. This left the pairing trading at around €1.1387.
Sterling remained under pressure today as risk appetite slumped after the US government made new attempts to blame China for the spread of coronavirus.
On Sunday night, US Secretary of State, Mike Pompeo said there was evidence the coronavirus was created in a lab in Wuhan.
This increased tensions and sent traders flocking to the safety of the US Dollar (USD).
Commenting on this, Monex Europe’s currency analyst, Simon Harvey said:
‘This morning’s session is being dominated by risk-averse trading as investors weigh the negative consequences to global growth from another escalation in U.S.-China tensions.
‘The headlines of further tariffs and supply-chain disruptions come at a time where global growth expectations are already fragile, causing currencies such as Sterling and the Euro to trade on the back foot this morning despite exit measures set to be announced or implemented in their respective economies.’
Pound Sterling Euro (GBP/EUR) Exchange Rate Muted as Germany Sees Steep Cuts to Factory Staff
The Pound Sterling Euro (GBP/EUR) exchange rate remained flat this morning. This left the pairing trading at around €1.1382.
On Monday morning, data revealed that Germany suffered an unprecedented fall in manufacturing output as the country fought to contain the virus.
Markit reported the bloc’s largest economy saw its manufacturing PMI fall from 45.4 in March to 34.5 in April.
Germany’s coronavirus lockdown led to record falls in output and new orders. Added to this the manufacturing sector saw the deepest cuts to factory staff since May 2009.
The single currency was left dampened as the sector was weighed down by fears of long-lasting disruption. This weighed on manufacturing business confidence.
Commenting on this morning’s data, Markit’s Principal Economist, Phil Smith noted:
‘The fall in manufacturing production in March now pales in comparison to the unprecedented drop seen in April following a full month of virus containment measures at home and abroad. Output nosedived as large numbers of manufacturers either temporarily closed factories or cut working hours amid a collapse in export demand across Europe and the US, and mounting supply chain challenges.
‘Even as more manufacturers start to come back on stream, there are still some huge question marks, like what kind of demand conditions are they returning to, and for how long will supply chains be impacted.
‘Given such a challenging outlook, job cuts have continued to gather pace despite the widespread uptake of the short-time working scheme, thus raising the chances of a more protracted recovery.’
Sterling (GBP) Flat as Traders Await PM’s Coronavirus ‘Roadmap’
The Pound remained under pressure today as the lockdown continued despite many other European countries easing restrictions.
Prime Minister Boris Johnson has promised a ‘roadmap’ of the current social distancing measures, which will be released later this week. The current lockdown is due to expire this Thursday.
Sterling was unable to benefit today despite the risk-off mood amongst investors, sparked by signs the coronavirus pandemic’s spread has peaked. This has led to a growing number of countries easing restrictions, or announcing the intention to do so in the future.
Pound Euro Outlook: Bundesbank and Services PMI in Focus
Looking ahead to Tuesday, the Euro (EUR) could suffer losses against the Pound (GBP) following several speeches from the policymakers from the Bundesbank.
If Germany’s Bundesbank policymakers are overly dovish about the damage to the country’s economy due to coronavirus, EUR will fall.
Meanwhile, Sterling will edge lower following the release of Britain’s services PMI.
If the highly-anticipated services PMI plummets further into contraction, reaching fresh all-time lows, the Pound Euro (GBP/EUR) exchange rate will remain flat.