Pound to Euro Exchange Rate Unable to Recover as Euro Remains Appealing
Market hopes for economies to bounce back from the coronavirus pandemic have been unable to keep the Pound Sterling to Euro (GBP/EUR) exchange rate supported. Investors may have little reason to buy the Pound (GBP) unless the UK outlook improves.
GBP/EUR movement has been gradually narrower lately. It comes as the Euro (EUR) pushes Sterling down and keeps it low. Last week saw GBP/EUR slide from the interbank level of 1.11 to 1.10.
When markets opened yesterday, GBP/EUR briefly dipped to a quarterly worst of 1.09. At the time of writing though, GBP/EUR is trending closer to the week’s opening levels again.
Sterling did attempt to recover more overnight. However, this morning’s Eurozone data is helping the shared currency hold its ground.
Pound (GBP) Exchange Rates Remain Pressured amid Concerns over Britain’s Recovery
The Pound (GBP) has seen continued weakness. Yesterday, Bank of England (BoE) Governor Andrew Bailey made some comments seen as relatively optimistic. He indicated that the bank could unwind quantitative easing (QE) early if it became reasonable.
However, this was not enough to notably boost Pound appeal. Investors are hesitant to buy Sterling to due concerns over Brexit, as well as Britain’s own coronavirus pandemic situation.
Analysts still believe that the UK government’s mixed handling of the pandemic could lead to a slower recover period. According to Analysts at Citibank, the BoE may refuse to rule out negative interest rates too:
‘We think GBP underperforms other G10 currencies as it faces headwinds from a lagged recovery relative to its G10 peers. As uncertainty persists, Citi’s view is for the Bank to formally no longer rule out the step below the zero line. More QE and fiscal easing are likely be the first lines of policy defence in case of a hard exit from the EU single market and customs union at the end of the year.’
Euro (EUR) Exchange Rates Find Support as Eurozone PMIs Topple Forecasts
The Euro (EUR) has already seen strong performance lately. Rather than falling from its highs though, the latest data is only helping the Euro to keep trending near highs.
This morning has seen the publication of the Eurozone’s June PMI projections. Overall, they have only added to hopes that the Eurozone economy could rebound from the coronavirus pandemic.
German and overall Eurozone PMIs beat expectations notably in all key prints. It showed that this month’s activity has been stronger than expected.
France’s stats in particular were very impressive though. Rather than recording smaller than expected contractions, services and manufacturing sectors both reported unexpected growth.
Euro liking this
FRANCE (JUNE) MANUFACTURING PMI ACTUAL: 52.1 VS 40.6 PREVIOUS; EST 46.0
FRANCE (JUN) MARKIT COMPOSITE PMI ACTUAL: 51.3 VS 32.1 PREVIOUS; EST 46.8
FRANCE (JUNE) SERVICES PMI ACTUAL: 50.3 VS 31.1 PREVIOUS; EST 45.2 pic.twitter.com/MXvf6uU17W
— Neil Wilson (@marketsneil) June 23, 2020
Pound to Euro (GBP/EUR) Exchange Rate Awaits More Eurozone Coronavirus News
Unless UK data due in the coming sessions has a particularly positive impact on the Pound (GBP), the Pound to Euro (GBP/EUR) exchange rate may continue to struggle.
In this situation, GBP/EUR may remain low until investors have more reason to sell the Euro (EUR). With more Eurozone data due in the coming days, and markets anticipating more coronavirus recovery plans from EU leaders, the Euro could remain in focus.
Markets are optimistic that the EU will agree to new fiscal stimulus policies to help the Eurozone recover from the pandemic. If the EU’s handling of the pandemic continues to impress, the Euro may continue to see strength.
Data over the coming days, including business confidence tomorrow and consumer confidence on Thursday, will continue to drive the Euro as well.
As for the Pound, investors remain anxious about Britain’s coronavirus and Brexit situations. Further comments from the Bank of England (BoE) could also influence the Pound to Euro (GBP/EUR) exchange rate.