Pound to Euro Exchange Rate Trends Narrowly as Both Currencies Weaken
Investors are hesitant to move too much on the Pound Sterling to Euro (GBP/EUR) exchange rate today. Markets are eagerly awaiting Brexit developments expected by the end of the week, and the Eurozone’s coronavirus outlook is worsening.
Last week saw GBP/EUR trending with a downside bias, but the pair ultimately avoided losses and closed the week near its opening levels, around the interbank level of 1.10.
This week’s movement has been comparatively more mixed. After a low dip yesterday, GBP/EUR has rebounded strongly. Yesterday afternoon, GBP/EUR touched on a one-month-high of 1.11.
At the time of writing on Thursday, GBP/EUR trended in the interbank region of 1.10 again. The pair remains above the week’s opening levels however.
Markets widely expect that the UK and EU will confirm whether or not Brexit negotiations are continuing before the end of the week.
Pound (GBP) Exchange Rates Kept Weak by Brexit and Coronavirus Fears
The Pound (GBP) remains under pressure today, as markets await the outcome of an expected deadline in UK-EU Brexit negotiations.
The 15th of October was a deadline self-imposed by the UK government and EU negotiators. While the EU has said it intends to continue negotiations, the UK government is expected to announce its decision today.
Markets generally expect that negotiations will continue. Still, this uncertainty is limiting the appeal of the Pound.
On top of Brexit uncertainty, domestic coronavirus jitters are weighing on the Pound. Job concerns are only worsening, as UK pub group Marston’s announced it will cut over 2,000 jobs as it is hurt by the coronavirus pandemic.
Asked about the breaking news that UK pub group Marston's is cutting 2,150 jobs, the minister says he knows the chain and he is "sorry about that".
— Theo Usherwood (@theousherwood) October 15, 2020
Euro (EUR) Exchange Rates Weak as Eurozone Intensifies Coronavirus Restrictions
After months of strong performance on coronavirus recovery hopes, the Euro (EUR) is being hit by coronavirus uncertainties again this week.
The pandemic’s second wave has been spreading with increasing intensity in major Eurozone nations. It has led to concerns that as the Eurozone attempts to tackle the pandemic, it will not be able to continue the strong recovery seen in recent months.
According to Yohay Elam, Analyst at FXStreet:
‘France announced a nighttime curfew in Paris and several other large metropolitan areas to combat the rapid spread of coronavirus in the eurozone’s second-largest economy. Germany, the continent’s economic ‘locomotive’ is considering imposing limitations if the situation fails to improve. The country has reported the largest number of cases since April.’
Eurozone data continues to have little impact on the Euro. This is because the coronavirus has only been hurting the shared currency’s outlook again in recent weeks.
Pound to Euro (GBP/EUR) Exchange Rate Direction Depends on Brexit Negotiations
Whether or not the UK government agrees to continue Brexit negotiations is likely to determine the direction of Pound (GBP) in the coming sessions.
If the UK government agrees to extend negotiations as expected, the Pound is more likely to be able to sustain gains. GBP/EUR gains would be especially likely as the Euro (EUR) continues to be weighed heavily by the Eurozone’s own worsening coronavirus situation.
On the other hand though, in the off-chance the UK government walks away from Brexit negotiations the Pound is likely to plummet across the board.
Of course, any signs that UK coronavirus restrictions could intensify could weigh more heavily on the Pound as well.
As for the Euro, it is likely to remain weak as the Eurozone’s own coronavirus situation continues to concern markets. Tomorrow’s Eurozone inflation data is unlikely to be influential either.
In fact, if upcoming comments from European Central Bank (ECB) President Christine Lagarde hints at more ECB easing, the Pound to Euro (GBP/EUR) exchange rate could be in for further gains.