Pound to Euro Exchange Rate Sinks Despite Bleak Outlook for Eurozone Economy
The Pound to Euro (GBP/EUR) exchange rate fell by -0.7% today, with the pairing currently fluctuating around €1.107.
The Euro (EUR) has benefited from its safe-haven status this morning as the US presidential election outcome remains uncertain.
Democrat leader Joe Biden is leading at 238 to incumbent Donald Trump’s 213 at the time of writing.
Neil Wilson, an analyst at Markets.com, explains:
‘[I]t could take days to decide final outcome, not even considering legal challenges prolonging the agony – A result today may not be possible, though if Biden clears 270 it seems difficult for Trump to mount a serious legal challenge.’
Consequently, the Euro could retain its safe-haven gains throughout much of this week.
In Eurozone economic news, today saw the release of the Eurozone’s latest PMI Composite figure for October, which beat forecasts and rose to 50.
Chris Williamson, the Chief Business Economist at IHS Markit, commented on the data:
‘Only in Germany has the strength of the manufacturing sector countered the renewed downturn in service sector activity, leading to increasingly polarised economic trends among the euro area’s member states. However, for all countries the outlook has grown increasingly dark.’
As a result, we could quickly see the single currency fall as the outlook for the Eurozone’s economy at large remains bleak.
Germany – the bloc’s largest economy – and France have both entered lockdowns to curb the spread of the coronavirus.
Pound (GBP) Plummets as UK Heads into Second National Lockdown
The Pound (GBP) fell today as the UK Parliament will vote on whether a second lockdown in England will go ahead from midnight tonight.
However, with both the Conservative Party – which holds a large majority – and much of the Labour Party expecting to back it, the outlook for the British economy remains grim.
Prime Minister Boris Johnson has insisted that the Covid-19 lockdown restrictions will come to an end on December 2nd, easing some of the concerns over an extended lockdown.
Mr Johnson said:
‘We have a very clear way ahead. These measures – the crucial thing to understand is that they expire on 2 December. They come to an end. And we therefore as a government and indeed as a country have a deadline and a target to develop solutions which previously … did not exist.’
Meanwhile, Brexit uncertainty continues to haunt UK markets, severely limiting the Pound to Euro exchange rate.
With just under 2 months to go until the UK is set to leave the European Union – with or without a deal – GBP investors are remaining cautious.
In UK economic news, today saw the Services PMI for October slip from 52.3 to 51.4. But with a lockdown due, the outlook for Britain’s largest sector is dark.
GBP/EUR Outlook: Could the Euro Head Higher on US Political Uncertainty?
Pound (GBP) traders will be awaiting tomorrow’s interest rate decision from the Bank of England (BoE).
Any dovishness from the Bank’s Governor, Andrew Bailey, however, would prove GBP-negative.
Euro (EUR) investors will be awaiting tomorrow’s release of the Eurozone’s Retail Sales figure for September.
If these continue to fall, then we could see EUR shed some of its gains.
The GBP/EUR exchange rate will likely remain volatile for the next few days, with the single currency benefiting from its safe-haven status as US election news unfolds.