GBP/EUR Exchange Rate Dented as Boris Johnson Warns of ‘Challenging’ Six Months
The Pound to Euro (GBP/EUR) exchange rate is on the defensive this morning after Boris Johnson issued a stark warning over the government’s new coronavirus restrictions.
At the time of writing the GBP/EUR exchange rate is trading at around €1.0863, virtually unchanged from this morning’s opening rate.
Pound (GBP) Slumps as Government Warns of ‘Tougher Measures’
The Pound (GBP) is struggling to attract support this morning, amidst concerns over the UK’s new coronavirus restrictions and the prospect of stricter measures in the future.
The UK government announced yesterday that pubs, restaurants and other hospitality venues will be required to close from 10pm, that office workers should work from home and plans to reopen sporting events for spectators were being suspended.
However it was Boris Johnson’s warning that these restrictions would likely need to remain in place for up to six months and ‘tougher measures’ could be needed that spooked GBP investors, as analysts warned this could see the recent UK recession extended into the spring.
Covid: Boris Johnson warns of tougher measures if new rules are flouted https://t.co/T2YvOk5eMb
— BBC News (UK) (@BBCNews) September 23, 2020
Signs of the slowing of the UK’s economic momentum were clear in this morning’s PMI release, with business outlook slumping to its lowest levels since May and the pace of job cuts in the private sector continuing to accelerate at an alarming pace.
Euro (EUR) Undermined by Gloomy PMI Figures
At the same time, the Euro (EUR) is struggling to take advantage of the Pound’s (GBP weakness this morning as the Eurozone’s own PMI figures make for some grim reading.
According to data published by IHS Markit, activity in the Eurozone’s private sector all but stalled this month, with the composite index tumbling back to just 50.1.
The slump in activity coincides with the spike in coronavirus cases across Europe, stoking concerns over future growth as cases continue to rise.
Bert Colijn, Team Lead Global Macro at ING, comments:
‘Alarm bells should be going off about the pace of the recovery at the moment as the number of new Covid-19 cases has been flaring up again.
‘While new measures against the virus have remained local and mild compared to March, it looks as though the economy is already feeling the effects of the increase in cases.’
GBP/EUR Exchange Rate Forecast: Coronavirus Concerns to Stoke Volatility?
Looking ahead, the Pound to Euro (GBP/EUR) exchange rate looks to be infused with additional volatility going forward, amidst growing concerns over the trajectory of coronavirus cases in both the UK and Europe.
New measures aimed at halting the spread of Covid-19 have been imposed on both sides of the Channel, and investors are naturally concerned about how this will damage economic prospects going forward.
However the real fear for both GBP and EUR investors is that a second lockdown could be imposed if these measures fail to curb the spread of the virus.
This would quash any chances of a V-shaped recovery and would rock both currencies, with the Pound likely to be particularly damaged as the UK also faces the threat of a no-deal Brexit this year.