Pound to Euro Exchange Rate Tumbling amid Safe Haven Demand
While the Euro (EUR) is not typically seen as a safe haven currency, it has been gaining from safe haven demand and this is keeping the Pound Sterling to Euro (GBP/EUR) exchange rate weak. The pair falls even as Sterling (GBP) gains against other majors.
Even as the Pound attempted to recover from lows at the end of last week, GBP/EUR ultimately slipped lower. GBP/EUR slipped from 1.1625 to 1.1556 throughout the week.
Then as soon as markets opened this morning, GBP/EUR quickly slumped and touched on a new 2020 low of 1.1434. GBP/EUR trends just above these lows at the time of writing, as the Euro soars across the board.
Investors will continue to closely watch coronavirus and market developments, but upcoming policy news could impact both the Pound and Euro outlooks.
Pound (GBP) Exchange Rates Losses Limited on Bank of England (BoE) and UK Budget Hopes
Over the weekend, the global market’s panic over the coronavirus outbreak once again significantly worsened. The spread of Covid-19 has caused panic to rise that the global economy will take a big hit.
Bets of interest rate cuts have risen across major economies, including Britain.
However, while Bank of England (BoE) interest rate cut bets have risen, the bank is not expected to be quite as dovish as many other major banks. This is because Britain’s monetary policy is already loose.
Investors speculate that looser UK monetary policy could boost a potential UK economic rebound.
Hopes for fiscal stimulus policy at the government’s upcoming budget plan are also supporting economic rebound hopes and the Pound. This has helped to limit Pound losses, but the Euro’s strength is still causing GBP/EUR to fall.
Euro (EUR) Exchange Rates Benefit from Flight to Safety
While not typically a safe haven currency, the Euro has been one of the major currencies benefitting most from the market’s rush to safe havens.
Alongside safe haven currencies like the Japanese Yen (JPY) and Swiss Franc (CHF), the Euro has been highly appealing in recent sessions. It has even gained strongly against another safe haven, its rival the US Dollar (USD), due to surging Federal Reserve interest rate cut bets.
Bets of European Central Bank (ECB) interest rate cuts are comparatively slim due to the bank’s rates already being low. This is comparatively boosting the Euro outlook.
Due to this as well as the Euro being popular as a funding currency, it is surging across the board in recent sessions.
Pound to Euro (GBP/EUR) Exchange Rate Outlook Could Depend on Policy News
Depending on how the coronavirus develops and the UK budget unfolds this week, the Pound to Euro (GBP/EUR) exchange rate could recover some ground.
This week is likely to be a fairly eventful week, not just for coronavirus news but also for developments in Britain and Eurozone economic outlooks.
Wednesday will see the publication of a slew of UK data, including trade, growth and production stats. However, the day’s biggest focus will be the government’s spring budget presentation.
If the government ramps up fiscal policy plans, hopes for a UK economic rebound are likely to rise. This could boost the Pound’s appeal even amid the coronavirus outbreak.
Upcoming Eurozone news could influence the Eurozone outlook as well and this could prove influential. Eurozone growth projection data is due tomorrow, with the European Central Bank’s (ECB) anticipated March policy decision on Thursday.
If the bank takes a more dovish than expected stance over the virus and the Eurozone economic outlook, the Pound to Euro (GBP/EUR) exchange rate will rebound more easily.
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