Pound Euro (GBP/EUR) Exchange Rate Slips on Fears UK Lockdown Easing Will Prompt Second Wave

GBP/EUR Exchange Rate Dented by Coronavirus Resurgence Fears

The Pound to Euro (GBP/EUR) exchange rate is on the defensive this morning amidst fears the easing of UK coronavirus restrictions put the country at a clear risk of a second wave of infections.

At the time of writing the GBP/EUR exchange rate is trading at around €1.1050, down roughly 0.3% from this morning’s opening levels.

Pound (GBP) Subdued as Experts Warn the UK must Prepare for a Second Wave

The Pound (GBP) is sliding this morning amidst concerns there is a ‘real risk’ of a second wave of coronavirus infections in the UK as the country prepares for sweeping lockdown changes.

Boris Johnson announced yesterday that pubs, restaurants and hair salons will be allowed to reopen from 4 July, with the 2m social distancing restriction being relaxed to a ‘one-metre plus’ rule.

During the government’s final daily coronavirus briefing on Tuesday, the government’s chief scientific adviser, Sir Patrick Vallance and the chief medical officer for England Professor Chris Whitty both warned of potential risks due to lockdown easing.

In a letter to Downing Street health officials in the UK warn that more steps need to be taken to prevent the easing of restrictions from prompting a second wave of infections.

In a letter signed by the chair of the British Medical Association, the officials warn:

‘While the future shape of the pandemic in the UK is hard to predict, the available evidence indicates that local flare-ups are increasingly likely and a second wave a real risk.’

‘Many elements of the infrastructure needed to contain the virus are beginning to be put in place, but substantial challenges remain.’

With UK daily coronavirus cases still stubbornly high, GBP investors fear that the premature easing of coronavirus restrictions could send the country back into full lockdown and erase the tentative economic recovery we witnesses since April’s record downturn.

Euro (EUR) Buoyed by Improving German Business Sentiment

Meanwhile, the Euro (EUR) has found some support this morning following the publication of Germany’s latest IFO survey.

June’s business climate survey revealed that German business confidence struck its best levels since the start of the European lockdown in March.

The better-than-expected reading was welcomed by EUR investors, who hope this is another sign that the Eurozone economy is back on the road to recovery.

GBP/EUR Exchange Rate Forecast: Brexit Woes to Limit Upside in Sterling?

Looking ahead, the Pound to Euro (GBP/EUR) exchange rate may remain on the back foot as Brexit begins to rear its ugly head once more.

The UK and EU are currently gearing up for accelerated summer talks starting next week, but despite some recent optimism from Boris Johnson on the chances of the two sides reaching a deal, analysts remain more cautious.

This is likely to see Sterling’s recent bearish trend continue so long as uncertainty persists.

Meanwhile, EUR investors will be keeping any eye out for the minutes from the European Central Bank’s (ECB) latest policy meeting tomorrow, as they look for more insight into the bank’s plans for the future.

Matthew Andrews

Contact Matthew Andrews