GBP/EUR Exchange Rate Rangebound as Bank of England Boosts QE
The Pound to Euro (GBP/EUR) exchange rate held steady this morning, with the pairing currently trading around €1.107.
Sterling recovered slightly today after the Bank of England (BoE) held its interest rates at 0.1%.
In attempt to stimulate Britain’s ravaged economy – from both Brexit uncertainty and the Covid-19 pandemic – the BoE said it would boost its quantitative easing stimulus package by £150 billion.
However, the Bank was overwhelmingly dovish about the long-term effects of Covid-19 lockdowns on the UK economy, saying:
‘Over the remainder of the forecast period, GDP is projected to recover further as the direct impact of Covid on the economy is assumed to wane. Activity is also supported by the substantial fiscal policies already announced and accommodative monetary policy.
‘The recovery takes time, however, and the risks around the GDP projection are judged to be skewed to the downside.’
Consequently, GBP investors remain cautious as the outlook for the nation’s economy for the fourth quarter remains grim, with talks of a possible double-dip downturn this year.
Brexit also appears to remain unresolved with talks between the UK and the EU showing no clear signs of progress.
Euro (EUR) Steady as Eurozone Economy Fights Its Way out of Crisis
The Euro (EUR) held steady today as the outlook for Germany’s economy – the largest in the Eurozone – remains bleak.
Meanwhile, German Factory Orders dropped in September, sinking from 4.9% to just 0.5%, sparking concerns for Germany’s manufacturing sector in the months ahead.
Germany’s Economy Minister said in its statement:
‘After a first strong recovery following the lockdown in April, industry continues to fight its way out of the crisis.’
The US election remains in focus, although the US Dollar is weaker today. This comes as the Democrat candidate Joe Biden edges closer to victory over the incumbent President Donald Trump.
Consequently, the Euro (EUR) has received a minor boost from its negative correlation with the US Dollar today.
However, after the Eurozone had only narrowly avoided a contraction in the fourth-quarter, EUR investors remain concerned that the bloc’s economy could suffer in the months ahead.
Eurozone Retail Sales for September appeared to confirm these fears. Retails fell from 4.2% to -2% month-on-month.
GBP/EUR Outlook: Could the Euro Suffer as US Political Volatility Intensifies in the Last Stretch?
Euro (EUR) investors will be awaiting tomorrow’s release of September’s German Industrial Production data.
If the Eurozone’s largest economy suffer a setback, then we could see the EUR/GBP exchange rate suffer.
Any further US political uncertainty would also prove EUR-negative, as risk-sentiment would plummet and benefit the safe-haven ‘Greenback’.
The GBP/EUR exchange rate could claw back some of its losses this week if Brexit talks show signs of progressing towards a post-Brexit trade agreement.