GBP/EUR Exchange Rate Steady as Eurozone Suffers Steep Decline in GDP
The Pound to Euro (GBP/EUR) exchange rate held steady today, with the pairing currently fluctuating around €1.10.
The Euro (EUR) failed to gain on Sterling this morning following the release of the flash Eurozone GDP figure for the second quarter, which confirmed forecasts and plunged by -12.1%. The year-on-year figure also fell by -15%.
The Federal Statistics Bureau said:
‘[This is] the steepest decline since quarterly GDP calculations for Germany began in 1970… even more pronounced than during the financial market and economic crisis.’
In other Eurozone economic news, today saw the release of the flash employment change figure for the second quarter, which fell unexpectedly from -0.2% to -2.8%. Consequently, EUR investors have become increasingly concerned about the bloc’s ability to recover from the Covid-19 pandemic.
Pound (GBP) Steady as Concerns Over Consumer Confidence Grow After France is Added to UK Quarantine List
The Pound (GBP) held steady today following Downing Street’s adding of France to a Covid-19 14-day quarantine list. This came soon after the French Prime Minister, Emmanuel Macron, said that infection numbers in France were ‘going the wrong way’.
Neil Wilson, an analyst at Markets.com, said that the UK’s decision would weigh on consumer confidence, adding:
‘Apart from the immediate damage this will do at the height of the school holidays and peak summer season, the quarantine decision also underlines the inherent risk you take in booking a holiday abroad right now, which will do nothing for consumer confidence.’
Nevertheless, Sterling has found increased support after hopes increased on a post-Brexit trade agreement between the UK and the European Union. This follows reassurances from the UK’s Chief Brexit Negotiator, David Frost, who said that a deal between the two powers could be reached by next month.
Mr Frost said:
‘Our assessment is that agreement can be reached in September, and we will work to achieve this if we can.’
GBP/EUR Outlook: Could Sterling Soar on Hopes of a Post-Brexit Trade Deal?
Pound (GBP) investors will be looking ahead to Sunday’s release of August’s UK Rightmove house price index. Any improvement would buoy confidence in Sterling as the British economy shows some improvement.
Meanwhile, Euro (EUR) traders will be looking ahead to Monday’s Eurogroup meeting. If the meeting is upbeat about the Eurozone economy’s ability to recover from the coronavirus crisis, then we could see the EUR/GBP exchange rate head higher.
Monday will also see the release of the French business climate in manufacturing gauge for August. Any improvement would prove EUR-positive.
The GBP/EUR exchange rate will also remain sensitive to Brexit developments next week. If the outlook for a post-Brexit trade deal improves, then we could see Sterling soar.