Pound to Euro Exchange Rate Advances Slow Following Mid-Week Recovery
After touching quarterly lows earlier in the week, the Pound Sterling to Euro (GBP/EUR) exchange rate has recovered some ground. Sterling (GBP) lacks the drive to climb much higher though, as the outlook remains dominated with uncertainties.
GBP/EUR opened this week at the level of 1.0997. Then, at the beginning of the week, GBP/EUR immediately tumbled to a low of 1.0904 – the worst level for the pair in a quarter.
Since then though, GBP/EUR has seen a modest rebound. The pair quickly recovered to above the week’s opening levels and kept climbing yesterday. At the time of writing on Thursday, GBP/EUR is trending just below a weekly high of 1.1093.
The coronavirus outlooks in Britain and the Eurozone continue to drive currency movements. Investors are also anticipating tomorrow’s key services PMI results.
Pound (GBP) Exchange Rates Lack Drive as Rebound May have been Overdone
Investors bought the Pound back from its cheapest levels in the middle of the week. As Q2 2020 drew to an end, markets adjusted positions. Analysts speculate the Pound was seen as overvalued, which helped it to rebound across the board.
However, the British currency’s outlook remains gloomy. The UK government’s handling of the coronavirus pandemic continues to face criticism, and optimism that a UK-EU Brexit deal will be made is gradually dampening.
As a result, some analysts are already saying that the Pound’s gains may have been overdone. According to FX Strategists at UOB Group, discussing the Pound’s jump against the US Dollar (USD):
‘We expected GBP to ‘edge higher’ yesterday but it lifted off and soared to a high of 1.2490. The sharp and rapid advance is deep in overbought territory. That said, there is room for GBP to continue to strengthen even though a break of 1.2540 would come as a surprise’
Euro (EUR) Exchange Rates See Lasting Resilience amid EU’s Optimism
Even with ‘second wave’ coronavirus fears occasionally spiking and market risk-sentiment shifting on and off, the Euro outlook remains fairly resilient.
Eurozone data continues to impress investors, and markets are generally happy with the EU’s progress on coronavirus stimulus.
Today, Netherlands Prime Minister Mark Rutte said that he believed a compromise in the EU’s recovery fund plans was possible.
As The Netherlands is considered part of the ‘frugal four’ nations, his comments made markets more optimistic that positive developments in EU coronavirus measures were likely.
On top of this, market risk-sentiment has been slightly boosted once again today. It comes amid reports that progress on a vaccine was also being made.
Eurozone Data Could Continue to Pressure Pound to Euro (GBP/EUR) Exchange Rate
The Pound outlook remains dampened by various coronavirus and Brexit concerns. As a result, even some decent UK data has not been enough to help Sterling sustain stronger gains.
In fact, with Eurozone data generally beating forecasts and EU officials continuing to make progress on coronavirus pandemic measures, the Euro could continue to keep the pressure up on rivals.
This week’s Eurozone data has all beaten expectations so far. If tomorrow’s Eurozone services and composite PMI figures impress investors too, investors are even more likely to hold on to the Euro.
The PMI projections showed services recovering to growth in France and seeing a surprisingly light contraction in the Eurozone overall.
Britain’s final June services PMIs will also be published tomorrow.
However, amid fears that the coronavirus will continue to hurt Britain’s economy, the PMI may not boost the Pound to Euro (GBP/EUR) exchange rate outlook much even if it impresses.
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