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Pound Sterling to Euro Exchange Rate Avoids Losses despite Sterling’s Gloomy Outlook

Pound to Euro Exchange Rate Avoids Losses amid US Dollar (USD) Weakness

Update 16:50 BST 19/08/2020:

The Pound Sterling to Euro (GBP/EUR) exchange rate briefly tumbled earlier, but the pair’s losses were limited. Before markets closed for the day, GBP/EUR was on the up again.

At the time of writing, GBP/EUR was trending in the region of 1.1087.

Investors are hesitant to sell the Pound (GBP) too much, as the currency is benefitting from weakness in the US Dollar (USD).

While the Euro (EUR) is the US Dollar’s biggest rival, the Pound has been gaining more lately as the Euro has already seen big gains against the US Dollar in recent months.

(Originally published 10:46 BST 19/08/2020)

Pound to Euro Exchange Rate Holds This Week’s Gains amid Strong UK Inflation

While this morning’s UK inflation report had little impact on Sterling (GBP), the Pound Sterling to Euro (GBP/EUR) exchange rate is still holding its ground today. The pair has been climbing since yesterday on hopes for progress in UK-EU Brexit talks.

Last week saw GBP/EUR briefly jump to a monthly best of 1.1146. However GBP/EUR ultimately tumbled again, sliding below the week’s opening levels to close at the level of 1.1050.

This week has already seen GBP/EUR make a fresh recovery attempt. Yesterday saw the pair rise around half a cent. GBP/EUR currently trends in the region of 1.1097, meaning it has recovered last week’s losses.

The Euro (EUR) outlook remains strong overall though. Investors may be hesitant to keep buying Sterling or sell the Euro unless the UK or Eurozone coronavirus situations see surprising developments.

Pound (GBP) Exchange Rates Buoyed as UK Inflation Beats Forecasts

Investors were a little more willing to hold onto the Pound today, after this morning’s UK inflation rate stats beat forecasts.

UK inflation was expected to remain at 0.6% year-on-year, but instead bounced to a strong 1.0%. The monthly rate came in at 0.4% rather than the expected -0.1%.

However, the data had little notable impact on the Pound outlook. This is because analysts expect it will not be enough to convince the Bank of England (BoE) to shift tones on monetary policy.

Analysts were still fairly optimistic on the news though, which helped Sterling to hold against the Euro. According to Neil Birrell, Chief Investment Officer at Premier Miton:

‘The consensus expectation for the month on month CPI was for it to be down, but it surprised with a rise of 0.4%, which was reflected in the year on year core CPI up 1.8%. It’s a bit early to call the return of inflation, but it does show that there is activity in the economy.’

Euro (EUR) Exchange Rates Little Impacted as Eurozone Data Misses Forecasts

Investors had little fresh reason to buy the Euro today.

The shared currency remains appealing overall due to the Eurozone’s handling of the coronavirus pandemic, as well as weakness in its rival the US Dollar (USD). However, the Pound was able to hold some gains against the shared currency.

Today’s Eurozone inflation rate data was a little weaker than expected. The data fell -0.4% month-on-month in July rather than the expected -0.3%.

Overall though, the data was not particularly surprising for investors. Investor appetite for the Euro was little-changed by the data.

Pound to Euro (GBP/EUR) Exchange Rate Awaits Brexit Developments and Data

The Pound to Euro (GBP/EUR) exchange rate may struggle to hold its advances for the remainder of the week, depending on potential Brexit developments.

If UK-EU Brexit talks show no signs of progress or even worsening tensions, the Pound could quickly shed some of this week’s gains and trend lower again.

On the other hand, surprising developments could lead to further GBP/EUR gains instead.

Data due for publication towards the end of the week could also influence the Pound to Euro exchange rate.

Thursday’s European session will see the publication of Eurozone construction stats and UK industrial trends orders data from CBI.

Friday’s session will follow with this week’s most influential data. UK retail sales results from July could knock the Pound lower again if they disappoint.

UK and Eurozone PMI projections from August will give markets a better idea of how the economies are performing amid the coronavirus pandemic. These could influence the Pound to Euro (GBP/EUR) exchange rate as well when they’re published on Friday.

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