Euro to Pound Exchange Rate Avoiding Losses despite Market’s Safe Haven Run
Despite rising demand for Euro (EUR) rival currencies, the Euro to Pound Sterling (EUR/GBP) exchange rate has held its ground. The Euro continues to see surprisingly resilient demand due to market optimism over the Eurozone.
EUR/GBP opened this week at the level of 0.9052, fairly close to its highest levels in months. At the beginning of the week, EUR/GBP briefly touched on a high of 0.9122, the best level since March.
Since then, EUR/GBP has been generally trending within a tight region. Sterling’s (GBP) recovery attempts have been short-lived, and the pair continues to hold its ground.
At the time of writing on Friday, EUR/GBP trends just below the week’s opening levels.
The Euro to Pound exchange rate may continue to hold its ground depending on upcoming developments in the Eurozone. Next week’s data may also prove influential.
Euro (EUR) Exchange Rates Continue to Find Support in Eurozone Optimism
The Euro continues to hold its ground towards the end of the week. This is despite a rise in demand for its biggest rival, the US Dollar (USD).
The US Dollar is a safe haven currency, and rises in global coronavirus cases and fears have led to higher safe haven demand. However, the Euro has been able to avoid major losses despite its strengthening rival.
Investors continue to find the Euro appealing due to optimism over the Eurozone’s own coronavirus situation. The EU is expected to continue to keep expanding its fiscal stimulus plans to protect the Eurozone from the pandemic.
According to Jeremy Stretch, Analyst at CIBC Capital Markets:
‘The combination of a plan advocating joint debt issuance, German fiscal expansion, and the extension of the ECB PEPP programmes underlines our bias towards medium run EUR impetus. The risk to our EUR bullish view is if talks on the EU rescue fund breaks down.’
Pound (GBP) Exchange Rates Weighed by Persisting Brexit Uncertainty
Investors remain hesitant to buy the Pound. A broad number of factors weigh heavily on the British currency.
As safe haven demand rises and risk-sentiment falls, the Pound is being hit by risk-aversion. Analysts are increasingly saying the Pound is becoming correlated to risk-sentiment.
With Britain’s coronavirus and Brexit outlooks filled with uncertainty, the British currency simply isn’t very appealing.
According to Yohay Elam, Analyst at FXStreet, Brexit negotiations remaining stuck certainly haven’t helped. The latest comments from UK Negotiator David Frost mean little progress can be expected:
‘David Frost’s frosty comments have added to the pessimism about Brexit talks and are weighing on the Pound. Michel Barnier, his opposite number in Brussels, sees a real breakthrough coming only in October.’
Euro to Pound (EUR/GBP) Exchange Rate May Remain Strong on Eurozone Optimism
The Euro to Pound (EUR/GBP) exchange rate continues to trend fairly closely to its best levels in months. Unless the Pound finds a surge in demand though, there may be little reason for this to change.
Even as the Euro’s appeal is slightly dampened by strength in its rival the US Dollar (USD), the Eurozone outlook remains optimistic.
Upcoming EU news and data could continue to support the Euro going forward as well.
Next week will see the publication of major Eurozone stats, such as economic sentiment data and inflation results from June. The Eurozone’s final June PMI data will be published towards the end of the week.
Of course, fresh developments in the EU’s stimulus plans may also be seen as optimistic and help the Euro.
Next week’s UK growth and PMI data may also influence the Euro to Pound (EUR/GBP) exchange rate, but Brexit negotiations may be a bigger focus for Sterling.