Business Currency News: Pound Plunges in Risk-Off Trade, US Dollar Rallies Amid Coronavirus resurgence fears

GBP/EUR Exchange Rate: Sterling Slumps as Market Sentiment Sours

The Pound to Euro (GBP/EUR) exchange rate fell roughly a cent over the past week in response to a sudden souring of market sentiment.

Sterling has grown increasingly vulnerable to investor sentiment in recent weeks as a result of growing Brexit uncertainty and criticism of the UK government’s handling of the coronavirus outbreak.

However, the Pound has been able to find some fleeting gains in recent days after Boris Johnson expressed his optimism over Brexit, even suggesting a deal could be reached in July with a ‘bit of oomph’.

Looking ahead, the Bank of England’s (BoE) latest policy meeting is likely to act as the main catalyst of movement for the GBP/EUR exchange rate through the latter half of this week. An expansion of the BoE’s stimulus programme seems all but confirmed, but will the bank make any mention of negative interest rates?

GBP/USD Exchange Rate: Pound Retreats from Three-Month High

The GBP/USD exchange rate plunged from a three-month high in the tail end of last week’s session, with the pairing shedding almost two cents in the process.

This downturn came as a result of souring market sentiment and was exacerbated by a sharp upswing in the US Dollar.

Sterling’s attempts to rally this week also proved to be short lived with some worrying employment figures and a sharp slowing of inflation, offsetting some Brexit optimism.

However, the Pound may make an attempt to rally early next week, should the UK’s latest PMI figures show a marked improvement in economic activity this month as more of the UK’s lockdown restrictions were eased.

USD/GBP Exchange Rate: US Dollar Surges as Hopes for a Swift Global Recovery Fade

The USD/GBP exchange rate jumped through the second half of last week as a slump in market optimism prompted investors to flock to the safe-haven US Dollar.

This came on the back of some gloomy forecasts from the Federal Reserve in which it warned the US economy faces a long road to recovery, which alongside rising fears of a second wave of coronavirus infections stifled hopes for a sharp V-shaped recovery of global growth.

While the US Dollar came under some pressure again at the start of this week, these losses were quickly reversed after the US reported a record surge in domestic retail sales in May.

Still to come this week is the release of last week’s initial jobless claims. Will another sizable increases in new claims through the second week of June give USD investors some pause for thought?

EUR/USD Exchange Rate: Euro Soars Buoyed by ECB’s Stimulus Expansion

The EUR/USD exchange rate tumbled last week, as the Euro’s negative correlation with the US Dollar saw the appeal of the single currency undermined by a surge in demand for the ‘Greenback’.

This drop in EUR/USD was made worse by the absence of any notable Eurozone data, which left the Euro mostly directionless through the latter part of last week.

Meanwhile, the single currency has found only brief gains this week despite upbeat ZEW surveys from Germany as well as the lifting of more coronavirus restrictions throughout the Eurozone.

All eyes will be on the EU summit of leaders scheduled for the end of this week. Leaders are expected to discuss the EU’s €750bn coronavirus recovery fund with the aim of settling on a deal by the end of summer, but any setbacks are likely to reflect poorly on the Euro.

Matthew Andrews

Contact Matthew Andrews