Pound Euro Exchange Rate Struggles to Mount Recovery as UK Uncertainties Rise
While today’s Eurozone ecostats were generally unsurprising, the shared currency is benefitting from the market’s mood this week and the Pound Euro (GBP/EUR) exchange rate is struggling near lows.
After a massive plummet of over two cents last week, GBP/EUR has continued to trend close to the interbank level of 1.15 this week so far.
Earlier in the week, GBP/EUR touched on a low of 1.14. This was the pair’s worst level in around two months, and GBP/EUR has been struggling to recover from those lows since.
The Pound (GBP) outlook remains strong though. Analysts predict the Pound could start to strengthen again, so strong UK data next week could cause a rebound in the Pound to Euro exchange rate.
Pound (GBP) Exchange Rates Unappealing amid Fresh UK Uncertainties
Following weeks of strong performance, investors have been hesitant to mount a strong recovery from the Pound’s plummet last week.
While Britain’s economy is gradually reopening, this has been proceeding as expected with no real surprises to the upside. As a result, investors have little reason to mount a fresh bout of Pound buying.
On top of this, concerns about how post-Brexit trade could affect the UK have been rising again. According to Analysts at ANZ Bank, concerns are rising once again about Ireland border issues, as well as rising independence sentiment in Scotland. The analysts said:
‘Both issues have the potential to temper positive sentiment towards sterling, and it will be important to monitor how they develop in coming weeks. For now, we would describe these risks as ‘on the radar’ rather than the central case. It is our assessment, however, that both issues have contributed to GBP’s weakness recently.’
Euro (EUR) Exchange Rates up as Shared Currency Attempts Recovery
Investors have been buying the Euro (EUR) more over the past week. It is benefitting from weakness in its biggest rivals, the Pound and US Dollar (USD), to finally mount something of a recovery after months of poor performance.
This week’s Eurozone data continues to paint a mixed picture for the Eurozone’s economic resilience. However, hopes for the Eurozone’s coronavirus vaccine rollout are rising, with analysts expecting the Eurozone will have recovered by the end of 2021.
Some analysts believe the Euro is undervalued against its biggest rival, the US Dollar, which is part of its stronger performance this week. According to Analysts at ING:
‘We also note that EUR/USD still remains undervalued by almost 2%, based on our short term financial fair value model.’
Pound Euro (GBP/EUR) Exchange Rate Could Weaken if Eurozone Data Impresses
As some analysts believe the Euro could be in for a recovery soon, Pound to Euro exchange rate investors are likely to pay close attention to upcoming Eurozone data and the bloc’s coronavirus pandemic situation.
Friday will see the publication of the Eurozone’s February trade balance and overall March inflation rate results. If these beat forecasts, the Euro is likely to end the week on a strong note.
Looking ahead to next week, some key UK data could cause Pound movement as well.
Tuesday will see the publication of Britain’s latest job market report. This will be followed by UK inflation and retail data later in the week.
April PMI projections for both the UK and Eurozone will also be published next week and will give investors a better idea of how the UK and Eurozone economies are weathering the coronavirus pandemic this month.
Shifts in market sentiment and strength in the Euro’s rivals, like the US Dollar, will also continue to influence the Pound Euro (GBP/EUR) exchange rate.