Pound Euro (GBP/EUR) Exchange Rate Steady as the Eurozone’s Economic Outlook Darkens

GBP/EUR Exchange Rate Rangebound as Eurozone Set to Struggle in Fourth Quarter

The Pound to Euro (GBP/EUR) exchange rate held steady this morning, with the pairing currently fluctuating around €1.110.

The Euro (EUR) continued to struggle today as Germany – the Eurozone’s largest economy – along with France have entered national lockdowns to curb the spread of the coronavirus.

Lena Komileva, a chief economist at G+ Economics, said:

‘Measures may prove slower to lift fully during the long winter flu season, even with the strong but short seasonal boost of Christmas travel and retail activity.’

However, the Euro (EUR) has suffered from its negative correlation to the US Dollar (USD), which has received a boost ahead of today’s US presidential elections.

Nevertheless, EUR has continued to be undermined by coronavirus concerns today after Goldman Sachs cut the Eurozone’s growth forecast owing to new lockdown measures.

Any further signs of other nations re-imposing nationwide lockdowns across Europe would prove EUR-negative.

Pound (GBP) Steady as UK Re-Enters Covid-19 Lockdown This Week

The Pound (GBP) has remained subdued today following news that the UK would be re-entering lockdown as of from Thursday this week.

As a result, Sterling traders are particularly concerned about the possibility that Britain could enter a double-dip recession.

Goldman Sachs has also slashed its growth forecasts for Q4, with the economy now expected to sink from 3.6% to -2.4% as lockdown restrictions limit the economy.

GBP investors are also remaining cautious on the lack of positive progress towards a post-Brexit trade deal.

With talks between the UK and the EU continuing this week, UK markets are remaining cautiously optimistic.

However, any breakthrough in UK-EU trade talks which points to a possible post-Brexit trade deal would prove GBP-positive.

Clemen Beaune, France’s Europe minister, was optimistic about a deal, saying:

‘If there is no deal there is no access to the EU market for the UK which I think if not in the UK’s interests. So let’s be balanced, let’s be clear, not play tactics or games, we have common interests in striking a deal.’

‘It’s in the EU and UK interest and more in the UK interests I’m afraid to strike a deal.’

GBP/EUR Forecast: Could Sterling Rise on a Brexit Breakthrough this Week?

Euro (EUR) investors will be looking ahead to tomorrow’s release of the Eurozone’s PMI Composite figure for October.

If this continues to fall below consensus, then we would see the EUR/GBP exchange rate fall.

Meanwhile, the Pound (GBP) could head higher this week if UK-EU Brexit talks progress towards securing a trade deal.

In UK economic data, tomorrow wills see the release of October’s Services PMI. Any improvement in the UK’s largest sector would prove GBP-positive.

The GBP/EUR exchange rate could also head higher this week if the US Dollar (USD) soars following the US presidential election. As a result, the negatively-correlated single currency would dip.

David Moore

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