Pound stumbles on Brexit uncertainty, US Dollar Strengthened by Coronavirus Concerns

GBP/EUR Exchange Rate: Sterling Plunges on Brexit Fears

The Pound to Euro (GBP/EUR) exchange rate plummeted to a new three-month low over the past week, mostly in response to renewed Brexit jitters.

GBP investors appeared particularly concerned by comments from German Chancellor Angela Merkel as she warned the UK will have to ‘live with the consequences’ of not seeking close alignment with the EU.

This was notable as it suggests Merkel, who had previously appeared open to compromising on Brexit in order to reach a deal, has hardened her tone significantly, increasing the risk of a no-deal scenario.

These concerns over Brexit may continue to limit any upside in Sterling going forward as the start to a month of ‘intensive’ trade talks keeps the issue squarely in focus.

The EU and UK are expected to provide updates following the latest round of talks at the end of the week, with the Pound poised to tumble again if the two sides report that progress towards a deal remains limited.

GBP/USD Exchange Rate: Pound Stumbles Amid Second Wave Fears

The GBP/USD exchange rate fell as much as two cents over the last week, with the pairing coming under significant pressure amidst growing concerns over a second wave of coronavirus infections.

There are growing fears that the UK’s plans to reopen the economy could be side-lined by a coronavirus resurgence, as Leicester city re-entered lockdown this week after a spike in cases in the area.

GBP investors also expressed their doubts over Boris Johnson’s ‘new deal’ to help revitalise the UK economy after lockdown, with the PM’s plans appearing to be a sped-up version of infrastructure spending plans already announced.

While a correction in the Pound amidst end-of-quarter trade helped the GBP/USD exchange rate rally from its first levels, the outlook for Sterling remains relatively gloomy so long as market sentiment remains downbeat.

USD/GBP Exchange Rate: US Dollar Bolstered by Safe-Haven Flows

The USD/GBP exchange rate struck a one-month high at the start of this week’s session as rising safe-haven demand benefitted the US Dollar.

This comes courtesy of rising coronavirus jitters, with the US in particular witnessing a startling rise of new coronavirus cases over the past week.

As a result, investors growing increasingly concerned that a second wave could upset chances of a V-shaped recovery in global growth this year, bolstering demand for safe-haven assets.

Also offering support to USD exchange rates over the past week has been some upbeat US economic data, with a strong US durable goods report and solid personal spending figures both being welcomed by USD investors.

Still to come this week is the release of the highly influential non-farm payroll report. Will another surge in employment growth in June help bolster the US Dollar ahead of the long 4 July weekend?

EUR/USD Exchange Rate: Euro Shaken by Transatlantic Trade Tensions

The EUR/USD exchange rate ticked lower through the second half of last week’s session in response to fears of a transatlantic trade war over the summer.

This was prompted by reports the White House is preparing to impose $3.1bn worth of tariffs on European goods, something the EU made clear it would not take lying down.

However, the Euro has fared better through the first half of this week with stronger-than-expected Eurozone inflation figures and German retail sales offering support to the single currency.

Looking ahead, the Eurozone’s jobs report could prove a stumbling block for the Euro in the latter half of this week as economists predict a spike in unemployment in May, although any losses could be quickly undone If the Eurozone retail sales figures impress on Monday.

Matthew Andrews

Contact Matthew Andrews