Pound Sterling Euro (GBP/EUR) Exchange Rate Muted as London Comes ‘Under Fire’ For Coronavirus Response
The Pound Sterling Euro (GBP/EUR) exchange rate remained flat this morning. This left the pairing trading at around €1.1395.
Sterling remained under pressure on Tuesday as growing fears about a second wave of coronavirus infections weighed on markets.
A second wave is likely to dent the global recovery late in the year while fresh signs of trade tensions also dampened sentiment.
Analysts have said new virus infections in China, Germany, and South Korea have buoyed safe-haven demand.
Meanwhile, Prime Minister Boris Johnson’s highly criticised plan for lifting lockdowns in the UK weighed on Sterling.
Commenting on this, Thu Lan Nguyen, FX strategist at Commerzbank noted:
‘The government in London has come under fire for its strategy for dealing with the pandemic.
‘Not just the timing of the planned easing measures is attracting criticism; there is also considerable confusion about the extent of these measures.’
Sterling (GBP) Flat Ahead of Finance Minister’s Furlough Scheme Announcement
The British government is due to set out details on how to make workplaces safer as people begin to return to work.
Added to this, Finance Minister Rishi Sunak will reveal changes to the country’s furlough scheme set out by the government.
The Coronavirus Job Retention Scheme pays employers 80% of the wages have staff put on temporary leave.
Speaking to LBC radio, UK Health Secretary Matt Hancock said:
‘Obviously it can’t last for ever and we are going to have to make changes. He’s going to announce the details of that.’
Euro (EUR) Strengthens Overnight
Meanwhile, the Euro was able to strengthen overnight against the Pound before falling back later this morning.
The market has turned short on the Pound on growing concerns of the Government’s handling of the coronavirus crisis.
Economists have said the country will be facing its worst recession in 300 years, and adds to the increased risk of the UK leaving the European Union without a deal at the end of 2020.
Britain and the European Union started the penultimate round of trade talks on Monday. Little progress has been made on any of the major sticking points.
Uncertainty also weighed on Sterling as Britain has made it clear it will not seek an extension to the current transition period.
Pound Euro Outlook: GDP and Industrial Production in Focus
Looking ahead to Wednesday, the Pound (GBP) could edge lower against the Euro (EUR) following the release of UK growth data.
If the British economy contracts further than expected during the first quarter, Sterling sentiment will be left dampened.
Meanwhile, the single currency could also be left under pressure following the release of weak industrial production data.
If March’s Eurozone data reveals production plummeted to levels not seen in over a decade, it will leave the Pound Euro (GBP/EUR) exchange rate flat.