GBP/EUR Exchange Rate Muted Following Lagarde Speech
The Pound to Euro (GBP/EUR) exchange rate is currently rangebound this morning following a speech by European Central Bank (ECB) President Christine Lagarde.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1207, virtually unchanged from this morning’s opening levels.
Euro (EUR) Rangebound as Lagarde Warns ECB’s ‘Mild’ Growth ScenarioAlready Outdated
The Euro (EUR) is struggling to find momentum against the Pound and the majority of its other peers this morning as markets respond to comments from the ECB’s Christine Lagarde.
Speaking online as part of the European Youth Event 2020, Lagarde discussed the ECB’s three scenarios for GDP in 2020 and warned that the bank’s ‘mild’ scenario -which would see growth slide by 5% as a result of the coronavirus crisis- is already outdated.
Watch President Christine Lagarde in an online Q&A on the ECB’s response to the coronavirus pandemic for @Europarl_EYE https://t.co/LfXUSljROz
— European Central Bank (@ecb) May 27, 2020
Lagarde suggests that the Eurozone’s economic contraction will fall between the bank’s ‘medium and severe scenarios’, and see the Eurozone economy shrink between 8% and 12% this year.
Lagarde also warned it is ultimately ‘very hard to forecast how badly the economy has been affected’ and that the ‘ECB had to resort to exceptional measures to make sure there is plenty of liquidity’.
However, Lagarde steered clear of discussing the potential implication for the ECB’s monetary policy, disappointing EUR investors who had hoped for more insight into whether the bank may expand its Pandemic Emergency Purchase Programme (PEPP).
Pound (GBP) Steady as Brexit in Focus
At the same time, the Pound (GBP) is trading in a narrow range this morning as Brexit returns to the spotlight.
While trade remain concerned by the potential for a no-deal Brexit this year, reports that the EU may be willing to ease its stance on fisheries has some GBP investors cautiously optimistic.
An EU source suggested:
‘There have been hints of a possible reconciliation of approaches. We would be looking to shift on demands to keep everything as is now, a somewhat maximalist opening position, if the UK also moved from its position of coastal attachment. That’s where the room for compromise lies.’
The fisheries issue has so far proven to be a major stumbling block in talks, with France extremely resistant to the UK’s desire to reclaim control over its fishing grounds.
So reports that the EU may be willing to make a concession have stoked hopes that the two sides could be close to a potential breakthrough in talks.
GBP/EUR Exchange Rate Forecast: Eurozone Economic Sentiment to Remain in the Doldrums?
Looking ahead, the Pound to Euro (GBP/EUR) exchange rate could tick higher again in the latter half of the week with the publication of the Eurozone’s latest business confidence figures.
These are expected to show that economic sentiment in the Eurozone remained mostly down beat in May, with firm’s remaining cautious in the outlook despite much of Europe easing lockdown measures this month.
Meanwhile, GBP investors will be paying close attention to UK coronavirus developments as a resurgence in new cases could derail the government’s plans to begin reopening the economy next month.