GBP/EUR Exchange Rate Muted Ahead of ECB Announcement
The Pound to Euro (GBP/EUR) exchange rate is mostly rangebound this morning as markets brace for the European Central Bank’s (ECB) policy announcement later this afternoon.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1171 , virtually unchanged from this morning’s opening rate.
Euro (EUR) Poised to Jump on Expansion to ECB’s Stimulus Programme
The Euro (EUR) looks set to rally today as the European Central Bank is widely expected to announce an expansion of its Pandemic Emergency Purchase Programme (PEPP).
The ECB launched the €750bn scheme back in March in response to the coronavirus crisis which had brought Europe’s economy to a standstill, however these funds are set to run out in September or October.
With the Eurozone still wrestling with the fallout from the pandemic, economists are forecasting that the ECB will move to expand its PEPP scheme to the tune of €500bn in order to help bolster the blocs recovery efforts.
The move will also coincide with the EU’s plans for a €750bn coronavirus relief fund, which EUR investors hope will enable a relatively speedy recovery in the Eurozone.
Pound (GBP) Faces Sustained Losses as Brexit Risks Grow
The Pound (GBP) looks to be facing some significant headwinds this month in light of the growing risk of a no-deal Brexit later this year.
While the current round of negotiations are still ongoing, there appears to be little chance of the UK and EU making any real breakthrough in trade talks anytime in the near future.
This becoming particularly worrying for GBP investors this month ahead of a key summit to assess the current progress of talks.
Negotiations between the two sides have all but stalled since the start of the year and despite the disruption caused by the coronavirus crisis Boris Johnson still remains reluctant to extend the transition period, concerns over which are expected to hammer Sterling sentiment in the coming weeks.
James Smith, an economist at Dutch Bank ING comments:
‘Brexit is back in the spotlight. There’s little to suggest we should expect any real progress, and that’s one reason why we’ve seen some risk premium creep back into the Pound.
‘The fading prospect of an extension to the post-Brexit transition period, and the risk of supply chain disruption at the start of 2021, casts a cloud over (Britain’s) GBP outlook.’
However, there is still a flicker of hope for GBP investors with both sides recently signaling they may be willing to compromise in order to get a deal through the door.
Comments are closed.