Pound Euro (GBP/EUR) Exchange Rate Struggle as Coronavirus Vaccine Boost Fizzles Out

Pound Euro Exchange Rate Edges Higher Again as Markets Adjust for the Weekend

Since opening this week, the Pound to Euro (GBP/EUR) exchange rate has been trending with an upside bias. The market’s rally on coronavirus vaccine hopes has largely faded, and focus is likely to turn towards Brexit in the coming weeks.

After opening this week at the interbank level of 1.10, GBP/EUR quickly advanced. The pair put in impressive gains as it capitalised on market sentiment, touching a half-year best of 1.12 in the middle of the week before falling back again.

While GBP/EUR has shed most of the week’s gains now, the pair is still on track to sustain some notable gains. At the time of writing, GBP/EUR is trending half a cent above the week’s opening levels in the interbank region of 1.11.

As Brexit developments will come into focus for the Pound, the Euro will be influenced by Eurozone data and coronavirus news.

Pound (GBP) Exchange Rates Shift to Brexit Uncertainty as Vaccine Rally Fades

Earlier in the week, the Pound saw a surge in demand. It came in reaction to news that a coronavirus vaccine effort from Pfizer Inc was testing effectively and safely.

This boosted hopes that Britain’s economy, which has been hit hard by the coronavirus pandemic, will be able to recover strongly next year.

However, amid concerns that Britain’s economy is still in for a gloomy winter holiday period, the Pound shed those gains yesterday.

According to Sam Cooper, Vice President of Market Risk Solutions at Silicon Valley Bank:

‘The weaker than expected print will put the brakes on the recent Sterling rally and will provide a reality check for the market and will highlight lingering headwinds for the Pound in the form of ongoing Brexit negotiations and the growing economic impact of the pandemic,’

Euro (EUR) Exchange Rates Claws Back Ground, Movement Remains Limited

The Euro has recovered somewhat against the Pound since the middle of the week. The Euro has been a fairly steady currency amid the global coronavirus pandemic, and it continues to see little major movement in recent weeks.

This week’s developments have done little to really influence the direction of Euro trade so far.

This is despite news that the Eurozone’s coronavirus situation is worsening. Infections are surging in the bloc, with major economies like Germany seeing new restrictions heading towards the end of the year.

German economists have been cutting growth outlooks, but the Euro continues to benefit from weakness in rival currencies like the Pound and US Dollar (USD).

Speaking about the Euro’s lack of drive, Marc Chandler, Chief Market Strategist at Bannockburn Global Forex, said:

‘Being in the middle of a range makes nobody happy. Bulls nor bears can be happy,’

Pound to Euro (GBP/EUR) Exchange Rate Could Surge Again on Brexit Developments

The Pound to Euro exchange rate’s gains this week have ultimately been modest, as the market’s coronavirus vaccine rally was short-lived.

However, depending on developments next week, the Pound’s outlook could see a huge boost.

Speculation has risen that UK and EU officials will be ready to present a Brexit deal next week. A Brexit deal is expected to be agreed before the end of the month, but uncertainty still lingers.

If there are optimistic Brexit developments, the Pound could surge as Brexit has been one of the most persistent downside factors for Sterling.

Of course, talks failing or a no-deal Brexit would have the opposite effect.

As for the Euro, if today’s Eurozone ecostats don’t influence the shared currency much, the Euro’s movement will likely continue to be driven by movement in rival currencies in the coming sessions.

The Euro could weaken in response to Pound strength, so the Pound Euro exchange rate is more likely to surge if there are optimistic UK developments next week.

Josh Jeffery

Contact Josh Jeffery