GBP/EUR Exchange Rate Struggling to Sustain Gains despite Pound Appeal
Investors are hesitant to buy the Pound Sterling to Euro (GBP/EUR) exchange rate too much this week. The Pound (GBP) remains broadly appealing on UK coronavirus vaccine hopes, but the Euro (EUR) is benefitting heavily from US Dollar (USD) losses as the US currency’s biggest rival.
Following last week’s surge of over a cent, GBP/EUR movement has been much narrower this week.
GBP/EUR opened this week at the level of 1.4000 and has been fluctuating within a tight region of those levels ever since. While GBP/EUR attempted to gain yesterday, the pair is trending just around the week’s opening levels again at the time of writing.
The Pound is more likely to sustain gains this week if tomorrow’s UK growth rate report impresses investors.
Pound (GBP) Exchange Rates Remain Appealing though Bullishness is Softening
The Pound has remained appealing this week, as investors continue to speculate that Britain’s coronavirus vaccination programmes are further along than those in other major economies.
There has not been much upside surprise in the UK outlook this week though, so investors have been hesitant to keep piling into the British currency.
Concerns about the effect of existing coronavirus vaccines on newer strains, as well as fresh UK-EU trade tensions, have also been limiting the Pound’s appeal for further gains.
Overall the Pound outlook is strong though, so Sterling appears likely to keep holding its ground. According to Petr Krpata at ING, ‘GBP outlook for coming weeks is constructive’.
Euro (EUR) Exchange Rates Continue to Recover on Rival Weakness
Market demand for the Euro has been stronger this week. The shared currency is benefitting as investors sell rivals like the Pound and US Dollar from recent highs.
In particular, the US Dollar’s losses this week have been the primary cause of fresh Euro strength. As the Euro and US Dollar often see a negative correlation, the Euro gains in times of US Dollar weakness.
While the Euro is gaining largely on US Dollar losses, the shared currency is also benefitting from hopes that the Eurozone’s coronavirus vaccine outlook will soon improve.
German Chancellor Angela Merkel also said today that the coronavirus pandemic lockdown would not last a day longer than necessary.
Pound to Euro (GBP/EUR) Exchange Rate Awaits Friday’s Key UK Growth Report
Investors have had little reason to make big movements on the Pound to Euro exchange rate so far this week, but there is potential for the pair’s movement to shift before markets close for the week.
Friday’s European session will see the publication of this week’s most influential UK ecostats. Britain’s December trade balance and production results will be published, as well as Q4 business investment and growth rate results.
In particular, Britain’s Q4 Gross Domestic Product (GDP) growth rate report could be highly influential for the Pound outlook.
If the data beats forecasts, it could indicate that Britain’s economy is weathering the coronavirus pandemic better than expected. This could give Pound demand a late-week boost.
On the other hand, if the data disappoints investors, concerns could worsen about the health of Britain’s economy.
The Euro will be driven by strength in rivals, so late-week weakness in the Pound or US Dollar could cause the Pound to Euro (GBP/EUR) exchange rate to fall.