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Pound Sterling to Euro Exchange Rate Struggles to Hold Ground amid Bank of England (BoE) Anticipation

Bank of England

Pound to Euro Exchange Rate Losses Mixed as Investors Await Key News 

Despite a lack of big surprises in the Pound Sterling to Euro (GBP/EUR) exchange rate this week, the pair has slipped. Investors are hesitant to keep buying Sterling (GBP) ahead of the Bank of England’s (BoE) upcoming policy decision. 

Following last week’s impressive GBP/EUR jump from 1.0977 to 1.1110, both currencies have become more jittery this week. 

After briefly touching on a fresh half month high of 1.1131 at the beginning of the week, GBP/EUR has trended lower again. 

At the time of writing on Wednesday, GBP/EUR had lost around a third of last week’s impressive gains and trends in the region of 1.1086. 

Investors are hesitant to buy either currency too much, which is leading to modest movement in comparison to last week’s surge. 

Pound (GBP) Exchange Rates Weighed by UK Coronavirus and BoE Jitters 

The Pound outlook was already filled with uncertainties when it saw a surge in demand last week. 

Investors bought the British currency due to broad weakness in the US Dollar (USD), despite UK coronavirus, Brexit and economic concerns weighing heavily on the outlook. 

These factors remain, and Britain’s coronavirus concerns have only worsened since last week. 

While markets are reassured that the UK government is now handling the pandemic with more weight than it initially did, there is also speculation that there could be a fresh lockdown in major regions like London. 

On top of this, investors are anxious about tomorrow’s upcoming Bank of England (BoE) policy decision. There is persisting speculation that the BoE could indicate that negative interest rates are on the table, which is keeping Sterling pressured. 

Euro (EUR) Exchange Rate Demand Weighed by ‘Second Wave’ Coronavirus Jitters 

The Euro has been one of the major currencies to benefit most from market hopes for a recovery from the coronavirus pandemic. 

The EU and European Central Bank’s (ECB) handling of the pandemic has been perceived as strong. It has left the Euro surging against hard-hit rivals like the Pound and US Dollar (USD). 

However, as fears of a ‘second wave’ of coronavirus infections solidifies in recent weeks, fears of worsening Eurozone infections are also hitting the Euro this week. 

A surge in coronavirus cases in Spain is only adding to these worries. According to Analysts at Danske Bank though, very bullish US news from the Federal Reserve or US data would be needed for Eurozone closures to suddenly make the Euro a lot less appealing than rivals. 

Pound to Euro (GBP/EUR) Exchange Rate Awaits Bank of England (BoE) Decision 

Investors are hesitant to move too much on the Pound to Euro exchange rate this week so far. The outlooks of both the Pound and Euro are being marred by coronavirus uncertainties. 

However, the Pound outlook could see a notable shift depending on how the Bank of England’s (BoE) upcoming policy decision unfolds. 

The BoE is expected to leave monetary policy unchanged when it meets tomorrow. The bank’s tone on issues like Britain’s coronavirus outlook will be closely watched however. 

If the bank hints at more policy easing on the way, or indicates that policies like negative interest rates are on the table, the Pound could be hit lower again. This could cause the Pound to shed much of the gains it saw over the past week. 

As for the Euro, tomorrow’s German factory orders data and Eurozone construction stats could cause some movement as well. 

Overall though, coronavirus and central bank developments are likely to be the focus for the Pound to Euro (GBP/EUR) exchange rate outlook.