Business Exchange Rates News: Pound Rallies amidst Upbeat Market Mood, US Dollar Slips on Coronavirus Vaccine Hopes

GBP/EUR Exchange Rate: Sterling Soars in Risk-On Trade

The Pound to Euro (GBP/EUR) exchange rate rallied sharply over the past week, as the increasingly risk-sensitive Sterling was bolstered by an improving market mood.

This helped propel the Pound higher through the latter half of last week’s session, in spite of renewed Brexit concerns after UK and EU officials warning of ‘significant differences’ following their latest round of talks.

The uptrend in the GBP/EUR exchange rate then extended into the first half of this week as well, with the pairing climbing to a new two-week high ahead of Rishi Sunak’s ‘summer update’.

The Chancellor’s summer supplementary budget will to update the nation on the current state of the UK’s economy as well as announce new stimulus measures to help support the country’s post-coronavirus recovery.

This could set the tone for Sterling through the second half of this week, with the Pound poised to shed some of its recent gains if Sunak’s budget underwhelms.

GBP/USD Exchange Rate: Pound Extends Gains, But Brexit Headwinds Remain

The GBP/USD exchange rate has rallied roughly two cents over the past week as the Pound benefitted from a correction in currency markets at the end of the second quarter.

This upswing in Sterling has been further supported by improving market sentiment, with some upbeat Chinese data and reports of positive progress towards a coronavirus vaccine helping to bolster hopes for a V-shaped recovery in global growth.

However, the upside in GBP/USD remains capped as investors remain pessimistic of the chances of a Brexit breakthrough.

The UK and EU are currently engaged in a month of ‘intensified’ trade talks, but so far progress has been limited, something which may see GBP/USD exchange retreat from its recent highs if this week’s round of talks concludes in a similar manner.

USD/GBP Exchange Rate: US Dollar Weakens in Risk-On Trade

The USD/GBP exchange rate fell to a two-week low this week as demand for the safe-haven US Dollar has been buffeted by improving market sentiment.

This upbeat mood was triggered by reports of positive results in the first human trials of a coronavirus vaccine, with optimism improving further in the wake of the US non-farm payroll report after the US economy added a record 4.8 million jobs in June.

However, tempering the US Dollar’s losses over the past week has been rising concerns over a second wave of coronavirus infections, with a startling spike of cases in the US and other countries spooking investors.

Still to come this week is ae the latest US jobless claims figures. Will unemployment levels have begun to spike again last week as a number of states were forced to reimpose lockdown measures?

EUR/USD Exchange Rate: Euro Undermined by Gloomy Economic Forecasts

The EUR/USD exchange rate found some modest gains over the past week, with the single currency finding some support on the back of some upbeat economic data.

This included an upwardly revised services PMI, stronger-than-expected employment figures as well as a record jump in Eurozone retail sales.

However, these gains were quickly unwound on Tuesday following the publication of the European Commission’s latest economic forecasts, as it slashed its Eurozone growth forecast for 2020 from –7.7% to –8.7% whilst also warning of ‘exceptionally high’ downside risks which could result in an even sharp recession than currently predicted.

Looking ahead, the focus for EUR investors will be on the upcoming EU summit of leaders, in which the EU’s €750bn coronavirus recovery fund is expected to feature prominently.

Matthew Andrews

Contact Matthew Andrews