Sterling Euro (GBP/EUR) Exchange Rate Falls as Investors Ditch the Pound
UPDATE: The Pound Euro (GBP/EUR) exchange rate plummeted this afternoon, falling by around -1.4%. This left the pairing trading at around €1.0849.
The Pound suffered steep losses today, with the currency plunging to one of the lowest level since 1985 against the US Dollar (USD).
This sell-off was mirrored in other Sterling currency pairings, including GBP/EUR, which hit the lowest level since August 2019.
The Bank of England’s (BoE) new Governor, Andrew Bailey has said policymakers are watching Pound movement ‘very carefully’.
Pound Sterling Euro (GBP/EUR) Exchange Rate Slips as Coronavirus Fears Dominate Markets
The Pound Sterling Euro (GBP/EUR) exchange rate edged lower this morning as coronavirus continued to weigh on markets. This left the pairing trading at around €1.0946.
Coronavirus fears continued to dominate markets today, leaving investors anxious despite the huge injections of liquidity from central banks.
Commenting on this, Bank of Singapore currency analyst, Moh Siong Sim noted:
‘Funding strains are still there, and I think that is what’s spooking the market still.’
Despite moves from central banks across the world including another emergency rate cut from the US Federal Reserve, market sentiment did not improve. This provided the single currency with an upswing of support as markets bet on safer currencies.
According to head of research at brokerage Pepperstone, Chris Weston:
‘The newsflow is about as fluid as we have seen.
‘It mirrors that of the  financial crisis if not worse … it’s very difficult to deal with this and I think FX traders don’t really know where to look at the moment.’
Sterling (GBP) Slumps as Sunak Promises to do ‘Whatever it Takes’
The Pound suffered losses against the Euro today after the UK government announced it would launch a £330 billion lifeline of loan guarantees along with £20 billion in tax cuts, grants and help for businesses.
British Chancellor Rishi Sunak promised to do ‘whatever it takes’ to help businesses. He also described the package as unprecedented.
Although, think tank, the Institute for Fiscal Studies said he would need to ‘come back with more’ which likely weighed on the Pound.
Added to this, JP Morgan economist, Allan Monks said that the size of the country’s stimulus measures for the year was ‘likely to look small compared to the economic shock underway’.
Investors are now waiting to see if the Bank of England (BoE) will cut rates and expand its £435 billion government bond buying programme.
Pound Euro Outlook: Will GBP Extend Today’s Losses?
Looking ahead, the Euro (EUR) could suffer slight losses against the Pound (GBP) following the release of construction data.
If Eurozone construction output declines more than expected in January, the single currency could edge lower.
However, the coronavirus pandemic is likely to remain in focus which could leave Sterling on the back foot and offset disappointing Eurozone data.
If markets continue to focus on the spread of the pandemic, traders will move away from riskier currencies and opt for currencies such as the Euro. This will see the Pound Euro (GBP/EUR) exchange rate edge lower.