Home » EUR » Pound Sterling to Euro Exchange Rate Hit by Worsening Global Outlook and Sentiment

Pound Sterling to Euro Exchange Rate Hit by Worsening Global Outlook and Sentiment

Pound to Euro Exchange Rate Down but Losses May Be Limited 

Despite a recovery attempt at the beginning of the month, the Pound Sterling to Euro (GBP/EUR) exchange rate quickly shed ground again last week. Fresh global concerns that emerged over the weekend have further weighed on the Pound’s (GBP) appeal as well. 

Last week saw GBP/EUR shed almost all of its June recovery attempts. GBP/EUR opened the week at the level of 1.1221, before tumbling almost a cent. GBP/EUR ultimately closed the week at the level of 1.1140. 

Since markets opened this morning though, GBP/EUR is already falling even lower. GBP/EUR briefly touched on a low of 1.1085 this morning, close to multi-month-lows seen at the end of May. 

At the time of writing, GBP/EUR had rebounded a little from its lowest levels. However, the pair lacks the drive for further gains. Britain’s economic and political outlooks remain filled with uncertainty as coronavirus and Brexit fears flare again. 

Pound (GBP) Exchange Rates Hit by Reviving Coronavirus and Brexit Fears 

After weeks of market hopes that the coronavirus pandemic was easing, could fresh panic be on the way? 

The Pound has been increasingly correlated to market risk-sentiment lately. A fresh rise in concerns for a second wave of coronavirus infections has led to demand for safe havens today. As a result, the Pound has been hit lower. 

It comes amid reports that Beijing has seen a fresh jump in new infections. Health officials have reportedly warned that the risk of the outbreak worsening is ‘very high’. 

This is on top of concerns that Britain’s own anti-virus measures had been lacking. More of Britain’s economy is set to reopen today, but some analysts have warned that it is still too soon to ease Britain’s lockdown. 

All this, on top of fresh concerns over the future of the Brexit process. The UK government has once again ruled out the possibility of the Brexit transition period being extended. 

Euro (EUR) Exchange Rates See Some Benefit from Market Safe Haven Demand 

Amid news that a second wave of coronavirus infections could begin, investors are more eager to look for safer investments to buy. This movement is benefitting the Euro (EUR). 

While not traditionally seen as a safe haven, the Euro has been benefitting from safe haven demand lately. This is due to market optimism around Europe’s handling of the coronavirus pandemic, as well as weakness in the US Dollar (USD) – the Euro’s biggest rival. 

According to Analysts at ING: 

‘As long as there is not too much back-peddling on this issue, the positive re-assessment of Europe should continue – including the easing of lockdowns – and the Euro should prove a good alternative to the pressured Dollar.’ 

Pound to Euro (GBP/EUR) Exchange Rate to React to Coronavirus Developments 

Could a second wave of coronavirus infections be on the cusp of beginning? Global markets are likely to remain anxious in the coming days as developments are closely watched. 

With many economies across the globe relaxing restrictions, there are concerns that the number of infections could jump again. 

In particular, the situation in Beijing will be watched closely. If infections jump in China again, fears of the second wave’s global impact will worsen. 

The Pound is also likely to be influenced by second wave fears. This is because of market concerns that Britain could also see a second wave due to the government’s criticised handling of the pandemic. 

The Euro, on the other hand, will remain fairly appealing as a safe haven. So long as rivals like the US Dollar (USD) remain weak, the Pound to Euro (GBP/EUR) exchange rate’s potential for gains is limited.