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Pound Sterling to Euro Exchange Rate Struggles as Coronavirus Uncertainty Dominates Outlook

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Pound to Euro Exchange Rate Struggling to Hold Ground on Concerns over UK Jobs 

Developments in the coronavirus pandemic have left the Pound Sterling to Euro (GBP/EUR) exchange rate fluctuating in recent sessions. Even today’s seemingly optimistic UK data is underlined by uncertainty around the coronavirus situation. 

Last week saw GBP/EUR shed the previous week’s gains, tumbling from 1.1220 to 1.1143. 

GBP/EUR has been struggling to move too far from levels around 1.11 in recent weeks, and the pair remains near these levels at the time of writing. 

This morning’s jump was short-lived. Economic and political uncertainties keep limiting Sterling’s appeal, while the Euro held its ground due to weakness in rival currencies. 

Pound (GBP) Exchange Rates Lack Drive as UK Job Report Comes with Caveats 

Investors were briefly impressed by this morning’s UK job market report. 

The data showed that Britain’s job market apparently performed much better than expected in April. Britain’s employment change came in at a positive 6k, rather than the expected plunge of –83k. 

The key unemployment rate remained at an impressive 3.9% rather than considerably worsening as forecast. 

However, analysts have been noting that there are a lot of downsides that these headline figures don’t show.  According to James Smith, Developed Markets Economist at ING: 

‘The stability in the unemployment rate masks some broader weakness in other parts of the jobs report. Job vacancies have plunged, almost back to levels seen in the financial crisis. Meanwhile some experimental statistics, based on payroll data, showed around a 600,000 fall in the number of people being paid since March.’ 

Euro (EUR) Exchange Rates Holding Ground as Market Uncertainty Persists 

Generally unsurprising German data this morning means there has been little major shift in the Euro’s movement in recent sessions. 

The shared currency has been recently buoyed by market optimism around the EU’s handling of coronavirus and US Dollar (USD) weakness. The US Dollar is the Euro’s biggest rival, so the Euro often benefits from safe haven demand in its place.

Still, market risk-sentiment has been mixed too. Fears of a second wave of coronavirus infections are rising. However, speculation that the US could soon introduce fresh stimulus measures have caused risk-sentiment to rise again. 

As a result, the Euro is largely holding its ground recently. The Euro outlook remains fairly solid compared to rivals, so investors are hesitant to sell it. 

Pound to Euro (GBP/EUR) Exchange Rate Awaiting UK Developments 

Both the Pound and Euro will continue to be driven by coronavirus developments going forward. However, the Euro’s appeal is likely to remain more resilient in comparison as investors are optimistic about the EU’s handling of the pandemic. 

Sterling’s outlook, on the other hand, remains limited. Pound investors are still highly anxious about the possibility of the Brexit transition period ending in a no-deal Brexit. 

On top of this, concerns persist that the Bank of England (BoE) could be pressured into introducing negative interest rates. 

As a result, Thursday’s Bank of England (BoE) policy decision could be highly influential for GBP/EUR this week. 

If the bank so much as hints that negative interest rates are possible, the Pound to Euro (GBP/EUR) exchange rate outlook will fall even lower.