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Pound to Euro (GBP/EUR) Exchange Rate Falls Despite Weak Eurozone Inflation Data

Euro Currency Forecast

GBP/EUR Exchange Rate Sinks as Markets Brace for US-China Trade News

The Pound to Euro (GBP/EUR) exchange rate fell by -0.5% today, with the pairing currently trading around €1.105.

The Euro (EUR) edged higher against Sterling today as its main competitor, the US Dollar (USD), has suffered from uncertainty over US-China trade relations. US President Donald Trump is expected to announce his ‘new’ policies against Beijing later today.

As a result of global uncertainty, and America’s uncertain position in the trade war, investors have sought out safe havens like the single currency instead.

Meanwhile, today saw the release of the Eurozone’s flash CPI data for May, which undershot forecasts and fell from 0.3% to 0.1% – a four-year low.

Bert Colijn, the Senior Economist for the Eurozone at ING, commented:

‘The severe economic fallout is having a deflationary effect, which means the ECB is likely to stay in a crisis-fighting mode for some time to come. Expect the ECB to increase PEPP as soon as next week.’

Today also saw the release of Germany’s retail sales report for April, which fell to -5.3%, although this was better-than-expected owing to the -12% forecast.  

Analysts at Reuters explain:

‘The figures are another indication that Europe’s largest economy is weathering the pandemic better than its neighbours and that consumption could rebound in the coming months as economic and social life returns to normal.’

The Pound (GBP) Falls as BoE Raise Speculation Over Negative Interest Rates

The Pound (GBP) suffered today amid growing speculation over the Bank of England (BoE) taking its interest rates to below zero. As a result, Sterling has suffered over growing concerns for the British economy going forward.

However, Dominic Bunning, a senior currency strategist at HSBC, commented:

‘Currencies weaken in anticipation of negative rates but the negative impact wanes after delivery. This may be interesting for the likes of GBP and NZD right now, as markets anticipate central banks following this route. But it will be short-lived.’

Meanwhile, today will see Chancellor Rishi Sunak announce a tampering of the furlough scheme.

Environment Secretary George Eustice commented ahead of today’s announcement:

‘I think there is a general overarching message here that we’ve had a very generous furlough scheme in place to help people through these extraordinary times and to ensure that businesses’ overheads could be covered.’

The Pound (GBP) has continued to fall today owing to a lack of UK economic data. However, with investors becoming increasingly concerned for the British economy, the GBP/EUR exchange rate looks set to deteriorate.

GBP/EUR Outlook: Could Poor UK Manufacturing Data Weigh on Sterling?

Euro (EUR) investors will be awaiting Monday’s release of the Eurozone’s Markit Manufacturing PMI for May. However, if this remains in the doldrums at 39.5, then we could see the single currency suffer on rising concerns for the bloc’s economy.

Monday will also see the publication of May’s UK Markit Manufacturing PMI data. With the UK economy expected to struggle, it’s unlikely we’ll see the Pound rise.

The GBP/EUR exchange rate will likely remain downbeat next week, with the UK’s economic situation struggling under the weight of the coronavirus pandemic.