GBP/EUR Exchange Rate Falls as Lockdown Blues Weigh on UK Markets
The Pound to Euro (GBP/EUR) exchange rate fell by -0.4% this morning, with the pairing currently trading around €1.106.
Sterling fell today after Prime Minister Boris Johnson announced a second national lockdown on Saturday, which has further fuelled fears of a Covid-19 ‘double-dip’ recession.
Gerard Lyons, former economic adviser to Boris Johnson when he was London mayor, commented:
‘The economy will contract and while not by as much as it did in the initial lockdown, it will still be significant, possibly as much as 7.5-10%.
‘I expect unemployment to rise from 1.52 million to 3 million and large swathes of firms to be left nursing debt that will inhibit their ability to recover.’
As a result, GBP investors are remaining cautious as the UK faces a minimum of four-weeks of national lockdown as the coronavirus infection rate increase nationwide.
In UK economic data, today will see the latest Markit Manufacturing PMI, which is forecast to hold at 53.3.
Any significant downturn, however, would prove GBP-negative as the outlook for the British economy continues to deteriorate.
Euro (EUR) Rises as German Manufacturing Sector Bounces Back in October
The Euro (EUR) edged higher today owing mainly to positive Eurozone economic data. Germany’s factory orders rose to their strongest levels since 1996.
Also, this morning saw the publication of Germany’s latest Markit Manufacturing PMI for October. The figure beat forecasts and rose to 58.2.
As a result, EUR investors have become cautious optimistic about the Eurozone’s largest economy’s manufacturing sector.
Phil Smith, Associate Economics Director at IHS Markit, commented on the data:
‘Manufacturing in Germany continued to bounce back strongly in October.
‘Less positively and perhaps a sign that growth could be about to slow as more firms get back to pre-COVID levels of output, we saw the first setback to manufacturing expectations for seven months in October. It comes amid rising numbers of coronavirus cases in Europe, and the increased threat of renewed disruption to supply and demand that comes with it.’
Euro (EUR) investors are becoming more concerned for the Eurozone’s economy now that both France and Germany – two of the bloc’s largest economies – enter lockdown to curb the spread of Covid-19.
GBP/EUR Forecast: Sterling to Sink as National Lockdown Looms
Pound (GBP) investors will monitor Britain’s coronavirus situation this week as the nation heads into a second national lockdown.
Consequently, we could see Sterling suffer if the lockdown looks like it could go on beyond the four-week
Brexit will also remain in focus this week. Sterling could claw back some of its losses is UK-EU trade talks show any progress towards a post-Brexit trade deal.
Meanwhile, Euro (EUR) traders will be eyeing tomorrow’s Eurogroup meeting. Again, any reiteration of a possible double-dip recession for the Eurozone’s economy would prove EUR-negative.
The GBP/EUR exchange rate will likely remain subdued this week as the UK enters national lockdown from Thursday.
Comments are closed.