Pound to Euro Exchange Rate Sheds Ground as UK Growth Falls Short
Despite attempting to climb in recent weeks, the Pound Sterling to Euro (GBP/EUR) exchange rate is tumbling today. As the latest UK data has been worse than investors expected, economist hopes for a strong rebound recovery are fading and the UK outlook becomes gloomier.
For the past two weeks, GBP/EUR has been climbing higher as the Pound (GBP) rebounds. Last week, Brexit and UK stimulus hopes helped GBP/EUR to climb from 1.1100 to 1.1175. This put the pair just below a half-month-best of 1.1188.
After opening fairly steadily yesterday though, the Pound slumped across the board. GBP/EUR has already shed over a cent since yesterday. GBP/EUR currently trends in the region of 1.1047.
Investors are selling the Pound due to Britain’s uncertainty-filled outlook. The Euro (EUR), on the other hand, is holding its ground due to hopes over the Eurozone outlook.
Pound (GBP) Exchange Rates Slump as UK Growth Fails to Meet Expectations
This morning’s European session saw the publication of most of this week’s most influential UK stats. Figures including trade balance, production figures and growth rate results were published.
Some of the May production data was less poor than predicted. However, May’s overall growth results were notably poorer than forecast. This is leading to Pound losses today.
Growth was predicted to rebound to 5.5% in May, but instead came in at 1.8% month-on-month. The yearly figure was –24.0% rather than the expected –20.4%. It indicated that May’s performance was generally worse than expected.
Analysts are saying the data suggests that Britain’s potential for a rebound in recovery have notably worsened. According to Ian Stewart, Chief Economist at Deloitte:
‘The bounce-back from COVID-19 has got off to a disappointing start. The pace of activity will have picked up sharply in June as the easing of the lockdown got underway. The chances of a quick return to normal, of the famed V-shaped recovery, are falling.
It is likely to take years, not months, to repair the damage to the economy done by COVID-19.’
Euro (EUR) Exchange Rates Steady as Eurozone Data Keeps Markets Hopeful
Investors are hesitant to sell the Euro, despite higher market demand for safe haven currencies.
The Euro has been one of the more appealing currencies of recent months. This is because the Eurozone’s economic and coronavirus outlooks are relatively optimistic.
The EU and European Central Bank (ECB) have been perceived as handling the coronavirus pandemic fairly well. The latest German data showing signs of recovery are also bolstering market optimism.
As a result of this, markets are not expecting any big surprises from the European Central Bank (ECB) this week. The Euro is seeing steady trade and this may continue.
Pound to Euro (GBP/EUR) Exchange Rate May Struggle to Recover
While some more UK ecostats are due in the coming days, the Pound to Euro exchange rate outlook may remain gloomy even if these impress investors.
UK inflation rate data is due to be published tomorrow. Job markets results will be published later in the week, on Thursday.
If Britain’s job market performed notably better than expected in May, it could serve to offset some of today’s growth jitters. However, unsurpising data or worse than expected data is unlikely to bolster the Pound’s dim appeal.
Even without poor UK data, the Pound outlook is gloomy due to concerns that a no-deal Brexit is still possible. Essentially, investors have little reason to buy the Pound.
The Euro outlook is comparatively optimistic due to Eurozone recovery hopes.
The European Cental Bank will hold its July policy decision on Thursday, and unless it is notably more gloomy than expected it is unlikely to impact the Pound to Euro (GBP/EUR) exchange rate.
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