GBP/EUR Exchange Rate: Weak GDP Figures Undermine Stimulus Driven Gains
The Pound to Euro (GBP/EUR) exchange rate rocketed up to a new three-week high through the second half of last week’s session, as Sterling surged on the back of Rishi Sunak’s stimulus announcement.
GBP investors welcomed the Chancellor’s £30bn stimulus package, sending GBP/EUR higher on hopes that it will help to protect jobs in the months to come.
However, we have seen the Pound subsequently nosedive through the first half of this week’s session, amidst a mix of Brexit uncertainty and poor economic data.
Sterling took a particular battering from the UK’s monthly GDP release, which revealed growth rebounded slower than expected in May and prompted speculation the UK economy could contract a startling 25% in the second quarter.
There may be more hurdles ahead for the Pound as well, with economists forecasting the UK’s latest jobs report will show unemployment jumped to a two-year high in May and that wage growth contracted for the first time in over five years.
GBP/USD Exchange Rate: Pound Strengthens but Brexit Uncertainty Tempers Gains
The GBP/USD exchange rate has gained around a cent over the past week as the UK’s new stimulus package was cheered by GBP investors.
However the Pound has failed to hold at its best levels as a result of ongoing Brexit uncertainty.
Following the latest round of talks in London, EU officials warned that ‘significant differences’ remain between both sides, something which undermined the appeal of Sterling through the start of this week.
GBP/USD has begun to recoup some of these gains after the UK’s latest CPI figures revealed a surprise uptick in domestic inflation last month, but these gains could be cut short if this week’s round of Brexit talks also ends in deadlock.
USD/GBP Exchange Rate: US Dollar Undermined by Upbeat Market Sentiment
The USD/GBP exchange rate temporary struck a three-week low last week as demand for the safe-haven US Dollar continues to be undermined by improving market sentiment.
Despite ongoing fears over the spike in US coronavirus cases this month and its impact on the global economy, investors appear broadly upbeat.
Much of this can be attributed to positive headlines regarding a potential coronavirus treatment, with markets growing increasingly hopeful a vaccine could be approved by the end of 2020.
Looking forward, the US Dollar remains poised to mount a comeback if escalating tensions between the US and China over Hong Kong begin to weigh on markets.
Also contributing to a potential USD rally will be the latest US retail sales figures, which are expected to show another month of robust sales growth in June.
EUR/USD Exchange Rate: Euro Skyrockets to One-Year High
The EUR/USD exchange rate has been catapulted to a one-year high over the past week.
A lot of these gains can be attributed to the Euro’s negative correlations with the US Dollar, which has sent the single currency surging amidst a broad USD sell-off.
This uptick in Euro has also been aided by some positive Eurozone economic releases over the past couple of weeks, which have helped buoy hopes that the bloc is already on the road to recovery.
However, the Euro faces a significant challenge if it is to extend these gains through the coming week as EU leaders are set to discuss the EU’s €750 billion coronavirus recovery fund.
This could see the Euro sharply lower if members are unable to convince the ‘frugal four’ to support the fund at the upcoming summit.