Pound Sterling Euro (GBP/EUR) Exchange Rate Buoyed as ECB Focus on ‘Uncertainty’
UPDATE: The Pound Sterling Euro (GBP/EUR) exchange rate rose by 0.4% on Thursday afternoon. This left the pairing trading at around €1.1102.
The Euro suffered losses during today’s session following the release of the latest European Central Bank (ECB) minutes.
July’s minutes revealed that policymakers were uncertain about the bloc’s economic outlook while the pandemic kept the bank on high alert.
Within the minutes, the word ‘uncertainty’ appeared 20 times, which weighed on the single currency.
Commenting on this, ING’s Chief Economist, Eurozone and Global Head of Macro, Carsten Brzeski noted:
‘Looking ahead, the latest comments from senior ECB officials at the start of August underlined that the ECB remains on high alert. A blog entry by Chief Economist Philip Lane stressed that the ECB expects a very gradual recovery after the initial rebound and suggested a clear willingness to do more if needed in order to bring inflation back to target. In this regard, the next ECB meeting in September will probably come too early to take a more distinct position on the shape of the recovery but will definitely create some more headaches regarding the inflation outlook.
‘As uncertainty will defintely not have disappeared at the September meeting, the meeting will come too early for new action. However, new downward revisions to the inflation forecasts could be the trigger for fresh monetary stimulus before year end.’
Pound Sterling Euro (GBP/EUR) Exchange Rate Muted as Coronavirus Cases Jump Across Europe
The Pound Sterling Euro (GBP/EUR) exchange rate remained flat on Thursday morning. This left the pairing trading at around €1.1063.
The Euro remained flat against Pound after Germany announced it had recorded its highest number of coronavirus cases since late April.
The bloc’s largest economy recorded 1,707 new cases over the last 24 hours, and a further 10 deaths.
Added to this, Spain’s health ministry announced 3,715 coronavirus cases were diagnosed in the 24 hours to Wednesday.
This was a new single day record for Spain since the country emerged from lockdown in June.
An increase in cases in France also weighed on the single currency. The country recorded an increase in new cases at the fastest rate since May.
Sterling (GBP) Struggles as Fed Fret Over Covid-19 Resurgence
The Pound struggled against the Euro during today’s session, just a day after UK inflation unexpectedly jumped to its highest level since March.
While inflation picked up last month, it is unlikely the Bank of England (BoE) is unlikely to draw conclusions from the data. The jump in inflation is expected to be temporary.
Meanwhile, the riskier Sterling edged lower during today’s session after the US central bank was more pessimistic about the world’s largest economy.
The latest minutes from the Federal Reserve showed policymakers cut forecasts for growth and employment gains.
Added to this, the Fed is worried that a resurgence of coronavirus cases will knock the recovery.
The minutes noted:
‘Although the staff assumed that additional fiscal stimulus measures would be enacted beyond those anticipated in the June forecast, the positive effect on the economic outlook was outweighed somewhat by the staff’s assessment of the likely effects of several other factors.’
The latest minutes stressed the coronavirus crisis is creating extremely high uncertainty over growth prospects. The Fed said:
‘Uncertainty surrounding the economic outlook remained very elevated, with the path of the economy highly dependent on the course of the virus and the public sector’s response to it.’
Pound Euro Outlook: Flash PMIs in Focus This Week
Looking ahead to Friday, the Pound (GBP) could claw back today’s losses against the Euro (EUR) following a slew of upbeat data.
If the latest UK consumer confidence jumps in August, while retail sales pick up and the latest flash PMI surveys shows growth in construction and services has expanded more than expected, GBP will rise.
However, upbeat flash PMI surveys from across the bloc could also buoy the single currency during Friday’s session.
If August’s flash data jumps more than expected it will offer EUR support. This could also leave the Pound Euro (GBP/EUR) exchange rate flat.