GBP/EUR Exchange Rate Subdued on UK Lockdown Speculation
The Pound to Euro (GBP/EUR) exchange rate is edging lower this morning as GBP investors are spooked by the prospect of a second UK lockdown.
At the time of writing the GBP/EUR exchange rate is trading at €1.1042, down around half a cent from this morning’s best levels.
Pound (GBP) Stumbles on Lockdown Fears
The Pound (GBP) is on the defensive against the Euro (EUR) and the majority of its other peers amidst growing speculation that the UK government may impose a second lockdown as the country’s coronavirus situation continues to deteriorate.
With the UK’s daily death toll rising to 367 and passing experts’ 200-a-day forecasts weeks earlier than initially expected, Boris Johnson is thought to be under renewed pressure from his scientific advisors for a second lockdown as they warn the second wave is set to be deadlier than the first.
Government sources told The Telegraph:
‘It’s going to be worse this time, more deaths. That is the projection that has been put in front of the Prime Minister, and he is now being put under a lot of pressure to lock down again.’
A second lockdown would undoubtedly have a significant impact on economic activity in the UK and would likely see the country contract again in the fourth quarter, a particularly worrying prospect for GBP investors given the added risk of a no-deal Brexit at the end of the year.
However there is also considerable resistance to a second lockdown from within Johnson’s own party, which could see the PM resist taking such drastic action.
Euro (EUR) Downside Capped Ahead of ECB Rate Decision
At the same time, the Euro (EUR) is also being pressured by speculation of European lockdowns this morning.
French President Emmanuel Macron is expected to announce a nationwide lockdown in a national address later this evening, and German Chancellor Angela Merkel is proposing the closure of bars and restaurants.
However despite the impending threat of more restrictions curtailing economic growth in the Eurozone, the Euro is showing remarkable resilience as EUR investors are reluctant to alter their position in the single currency ahead of tomorrow’s rate decision by the European Central Bank (ECB).
No policy changes are expected from the ECB this month, but in light of Europe’s coronavirus woes will the bank’s forward guidance hint at some more monetary easing in December?