Pound Euro (GBP/EUR) Exchange Rate Plummets on ECB Minutes

Pound Sterling Euro (GBP/EUR) Exchange Rate Slumps as Brexit Worries Dominate Markets

UPDATE: The Pound Sterling Euro (GBP/EUR) exchange rate slumped by around -0.7% this afternoon. This left the pairing trading at around €1.0997.

The single currency jumped at the end of the week, setting itself up for the largest weekly rise in three weeks.

Monetary policy minutes showed the European Central Bank (ECB) reaffirmed its dovish stance. Cautious comments from the bank’s policymakers offered the single currency support as they suggested the ECB would extend its bond purchasing plans at the end of 2020.

Meanwhile, Sterling struggled as markets focused on Brexit trade talks. Markets worried the UK would be unable to secure a trade deal with the EU as little progress has been made since the country officially left the bloc.

Added to this, so far this month Sterling has been one of the worst performers amongst major currencies.

Pound Sterling Euro (GBP/EUR) Exchange Rate Muted as French Households Fearful of High Unemployment

The Pound Sterling Euro (GBP/EUR) exchange rate remained flat this morning. This left the pairing trading at around €1.1051.

Euro sentiment improved slightly after the European Central Bank’s (ECB) President Christine Lagarde said the bloc is ‘probably past’ the worst of the economic crisis.

On Friday, the ECB chief noted:

‘We probably are past the lowest point and I say that with some trepidation because of course there could be a severe second wave.’

Meanwhile, the single currency received a slight upswing of support this morning after French consumer confidence rose.

Confidence in France rose more than expected in June, adding to signs the outlook for the bloc’s second largest economy is improving.

The country’s indicator for confidence rose from May’s 93 to 97 in June. The data also showed a quick improvement in households’ assessment of their ability to make larger purchases.

However, households remained fearful about unemployment, with concerns rising to the highest level in seven years. The government expects France’s economy to contract by -11% in 2020, which would put as many as 800,000 jobs at risk.

Pound (GBP) Flat on Second Wave and Brexit Risks

Sterling was left flat against the Euro after markets stabilised after this week saw a sharp deterioration of risk appetite.

The rise of coronavirus cases across the United States left traders worried. Added to this, US Federal Reserve policymakers, George and Kaplan warned that the increase in infections could delay the country’s plans to reopen.

However, safe-haven demand due to the surge in coronavirus cases left the pairing flat at the end of the week.

Worries about a second wave of the virus as well as negotiations over a post-Brexit trade deal weighed on the Pound.

This week saw Prime Minister Boris Johnson unveil further easing of the lockdown restrictions. This has sparked warnings from many health experts that this could lead to a second wave of the virus.

Added to this, concerns increased over whether the UK will be able to reach a deal on its future trading relationship with the EU.

Pound Euro Outlook: Next Week’s Brexit Talks in Focus

Looking ahead, the Pound (GBP) could suffer losses against the Euro (EUR) as traders look to next week’s trade talks between the UK and EU.

If traders are pessimistic about significant progress during the next round of talks, Sterling will slide.

Meanwhile, single currency traders will be focused on Monday’s Eurozone business and consumer confidence.

If both business and consumer confidence rises higher than expected in June as lockdown measures were eased, the Pound Euro (GBP/EUR) exchange rate will edge lower.

Millie Empson

Contact Millie Empson