Pound to Euro Exchange Rate Unable to Recover as Euro Rivals Weaken
Update 16:52 BST 13/08/2020:
While the Pound (GBP) has been able to recover against some majors today, the Pound to Euro (GBP/EUR) exchange rate remains under pressure.
Investors are hesitant to buy the Pound again amid a lack of fresh support for the currency. Meanwhile, the Eurozone outlook remains fairly optimistic compared to the UK and US outlooks, keeping the Euro (EUR) buoyed.
At the time of writing, GBP/EUR trends in the region of 1.1062.
(Originally published 10:13 BST 13/08/2020)
Pound to Euro Exchange Rate Floundering Near August Lows
Despite yesterday’s UK growth rate data beating forecasts, the Pound Sterling to Euro (GBP/EUR) exchange rate tumbled. It came as investors feared that Britain’s economy would struggle to recover from the impact of the coronavirus pandemic.
Initially it seemed as though GBP/EUR may recover last week’s losses. After opening this week at the level of 1.1076, GBP/EUR rebounded to a high of 1.1148. This was the best level for the pair in almost a month.
However, yesterday saw GBP/EUR shed all those gains and trend below the week’s opening levels.
At the time of writing, GBP/EUR is trending closer to the level of 1.1048 – close to the pair’s worst levels all month.
Pound (GBP) Exchange Rates Weak as UK Growth Outlook Gloomy
Yesterday saw the publication of Britain’s Q2 Gross Domestic Product (GDP) report. While some notable stats were better than forecast, the data also revealed that Britain’s economy was hit harder than many other major economies by the coronavirus pandemic.
Sterling was unappealing following the data. This was partially due to concerns that Britain’s economy would not be able to recover from the pandemic as much as hoped.
The UK government has come under criticism for its mixed support for businesses and employees. Markets fear that as the furlough scheme unravels, Britain’s job market will be hit hard.
According to a report in The Times this morning:
‘Responding to GDP figures that show that economy was two months into a recovery from the deepest recession on record, employer organizations and unions told the Chancellor, Rishi Sunak, to extend furlough or cut employment taxes to avert a jobs disaster.’
Euro (EUR) Exchange Rates Lack Drive but Remain Appealing
The Euro (EUR) was able to advance against a weaker Pound last night, despite a lack of fresh drive in the shared currency’s outlook.
This week’s Eurozone data has also been mixed so far. Yesterday’s Eurozone industrial production was weaker than expected.
This morning’s French unemployment rate was better than expected, but German inflation and wholesale prices stats were more mixed.
Overall, the Euro is benefitting more from the relative appeal of the overall Eurozone outlook. This is because the Eurozone is perceived as handling the coronavirus pandemic better than the UK and US.
Concerns about EU-US trade tensions also limited the Euro’s appeal today. The US announced changes to its EU tariffs.
Pound to Euro (GBP/EUR) Exchange Rate Awaits Eurozone Growth Rate Data
Most of this week’s key data has been published already. Despite some surprises, the news has not been enough to improve the gloomy Pound to Euro exchange rate outlook.
However, some key Eurozone data due at the end of the week could still influence movement if it surprises investors. Friday’s European session will see the publication of French inflation data, as well as Eurozone growth rate results.
The Eurozone’s Q2 growth projections are expected to show deeper contractions than in Q1, but not as big as those seen in Britain.
If Eurozone growth is not as bad as forecast, it could bolster the Euro’s appeal as resilient amid the coronavirus pandemic.
Eurozone trade balance and employment change stats will also be published.
Any shifts to UK or Eurozone policy on handling the coronavirus pandemic will also remain influential for the Pound to Euro exchange rate outlook.
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