Pound to Euro Exchange Rate Little-Impacted by Slump in Eurozone PMIs
Britain became the latest country to enter lockdown yesterday, and this has only deepened the pressure on the already weak Pound to Euro (GBP/EUR) exchange rate. Britain follows other countries going into lockdown as the global coronavirus pandemic continues.
The Euro (EUR) remains fairly safe compared to Sterling (GBP). This is keeping downside pressure on GBP/EUR and the pair has been unable to sustain much of a recovery.
After touching a decade low of 1.0533 last week, GBP/EUR recovered slightly and closed the week in the region of 1.0844.
The outlook for the pair remains gloomy and GBP/EUR has been trending lower again since yesterday. At the time of writing, GBP/EUR is trending near the level of 1.0762.
Some dire Eurozone data has been published this morning. It has had little impact on the Euro’s appeal.
Pound (GBP) Exchange Rate Appeal Dampened as UK Goes into Lockdown
Late on Monday, UK Prime Minister Boris Johnson announced that Britain would enter a stricter lockdown to limit the potential damage of the coronavirus.
There is expectation that this will have a significant impact on Britain’s economy. The Pound outlook has been dampened by the move.
The lockdown move was also largely expected though. As a result it has only had limited downside impact on Sterling.
Other major countries have already seen lockdown measures. Part of the Pound’s weakness was market concern with Britain’s more staggered method to dealing with the pandemic.
As Sterling has already seen such heavy losses due to the pandemic, some analysts question whether it will fall much farther. According to a note from UBS Wealth Management:
‘The British Pound is undervalued. We think it has appreciation potential, particularly against the US Dollar over our tactical investment horizon, if the UK embarks on a fiscal stimulus package,’
Euro (EUR) Exchange Rates Solid on Safe Haven Demand despite Collapse in Eurozone Activity
The Euro is benefitting slightly from the market’s demand for safe havens today. As Federal Reserve news hits the US Dollar (USD) and the Pound remains weak, the Euro has been able to advance against these rivals.
This is keeping the Euro fairly resilient, even as the latest key Eurozone data paints a dire picture.
Largely expected due to the coronavirus outbreak’s impact, Markit’s latest PMI data shows a shocking collapse in activity.
The Eurozone’s overall composite PMI plummeted from modest growth of 51.6 in February to a shocking contraction.
Interestingly, Eurozone manufacturing was resilient, seeing a smaller than expected contraction. Overall though, markets are becoming more convinced that a global recession is inevitable.
Pound to Euro (GBP/EUR) Exchange Rate Outlook Awaiting Fiscal Stimulus News
Britain has ramped up its plans for virus protection and the EU is showing more signs of allowing and encouraging aggressive fiscal policy to protect economies.
Data is already showing signs of dire weakness and deepening recession fears. As a result, markets are now even more eagerly awaiting more fiscal stimulus news.
Analysts predict that the Pound, for example, will have more chance of rebounding from its cheapest levels if the government ramps up stimulus.
Meanwhile, EU nations are now expected to begin ramping up stimulus as well. The EU suspended deficit rules to allow members to freely boost public spending and protect economies from the impact of the coronavirus pandemic.
Amid the focus on domestic government policy, upcoming data may be overshadowed.
The Pound to Euro (GBP/EUR) exchange rate outlook will continue to be driven by shifts in the coronavirus situation and how it influences risk-sentiment.