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Euro to Pound Sterling Exchange Rate Floundering Near Lows after Boost to Brexit Outlook

Euro to Pound Exchange Rate Struggles to Recover amid Eurozone Economic Fears 

The Euro to Pound Sterling (EUR/GBP) exchange rate has struggled to recover from near its worst levels this week. As the Eurozone economic outlook worsens, the Pound (GBP) outlook has been boosted by rising Brexit deal hopes. 

After opening this week at the level of 0.9072, EUR/GBP advanced in the first half of the week. EUR/GBP touched on a high of 0.9147 – the best level for the pair all month. 

EUR/GBP then tumbled from those highs though, slumping to a month and a half worst of 0.9012. 

Since yesterday, EUR/GBP has been edging away from those lows. Its gains have been limited though, and at the time of writing EUR/GBP still trends low in the region of 0.9040. 

The Euro (EUR) may lack the drive to make a bigger recovery, and Pound demand may rise further if Brexit deal optimism persists. 

Euro (EUR) Exchange Rates Struggle to Recover as Eurozone Economic Fears Worsen 

The Euro has been driven largely by rival currency movement in recent weeks. As a result, it was initially strong on Pound and US Dollar (USD) weakness earlier in the week. 

However, while the Pound is slipping back from its Brexit-inspired surge today, the Euro has been unable to capitalise on this and recover. 

This is due to rising safe haven demand boosting the Euro’s rival, the US Dollar (USD), as well as rising concerns that the Eurozone economy is in for another recession. 

Today’s Eurozone PMIs indicate to markets that the Eurozone could be in for what some analysts are calling a ‘double-dip recession’. 

Pound (GBP) Exchange Rates Sustain Gains amid Today’s Mixed UK Data 

This week has seen the Brexit rollercoaster continue. Investors bought the Pound in the middle of the week after it was confirmed that UK-EU Brexit negotiations would officially continue into November. 

It followed UK officials saying they had walked away from talks. Talks resuming despite this boosted market hopes that both nations were eager to secure a deal regardless of political gestures. 

Hopes of some kind of Brexit deal being reached rose. These hopes boosted the Pound and are keeping it high today despite some mixed UK data. 

UK retail sales results beat forecasts, but key UK services PMI data is showing that the coronavirus second wave is already hurting Britain’s economy.  According to the report, from Markit: 

‘Lower staffing numbers were primarily widely attributed to redundancies and the need to reduce operating costs amid shrinking customer demand.’ 

Euro to Pound (EUR/GBP) Exchange Rate Outlook Could Weaken Further on ECB 

Despite months of strong, resilient performance, the Euro’s outlook has been taking a hit in recent weeks. If the Pound outlook continues to benefit from Brexit hopes or even optimistic Brexit developments, the Euro to Pound exchange rate could be in for further losses. 

If Eurozone data continues to indicate that the bloc’s economy is being hit hard by the coronavirus second wave, coronavirus developments could keep pushing the Euro lower. 

The Euro would be especially vulnerable if its rival, the US Dollar (USD), continues to rise on safe haven demand. This is possible as the US 2020 Presidential Election continues to draw closer. 

What’s more, it’s possible that the Euro could be hit by next week’s European Central Bank (ECB). The ECB is expected to remain dovish on the Eurozone and may even ramp up dovishness as the coronavirus pandemic worsens.  

This is likely to keep the Euro under pressure. If Brexit optimism continues to rise next week, the Euro to Pound (EUR/GBP) exchange rate outlook may fall lower and lower.