Pound Euro Exchange Rate Slumps as Britain’s Outlook Hit by Intensifying Uncertainty
Despite hopes for optimistic developments boosting the Pound Euro (GBP/EUR) exchange rate last week, the pair is plunging again this morning. Investors are selling Sterling (GBP) as Britain’s coronavirus and Brexit situation worsens.
GBP/EUR has been on a rollercoaster ride this month. Since last week alone, GBP/EUR has jumped from the level of 1.0921 to 1.1031 – a cent – before falling again this morning.
Last week saw GBP/EUR touch on a fortnight high of 1.1129 as well. However at the time of writing those highs seem far off, and GBP/EUR is trending over two cents lower in the region of 1.0884.
Fears of a cliff-edge scenario and uncertainty over a new Covid19 strain discovered in Britain are likely to keep the Pound unappealing going forward.
Pound (GBP) Exchange Rates Throttled by Brexit and Coronavirus Panic
A combination of concerns hit the Pound over the weekend. Not only has a Brexit deal still not been agreed with time running out before the end of the transition period, but a new strain of the coronavirus has hit Britain.
Reportedly, a new strain of Covid19 that spreads even faster has been discovered in South-East England, leading to the introduction of new even stricter lockdown measures in some key regions including London.
The news is reportedly causing many key EU nations to refuse transport entry to and from Britain. This is also leading to much trade to become locked up as well.
Ulrich Leuchtmann, Strategist at Commerzbank, said it could give markets an idea of what a no-deal Brexit could look like:
‘The British horror stories of a shortage of goods after a hard Brexit are taking on a whole new drive – for a completely different reason,’
Euro (EUR) Exchange Rates Also Weakened by Pandemic
Concerns about the Eurozone’s economy needing to face additional lockdown to weather surges in the coronavirus pandemic are weighing on the Euro slightly today.
This is making it easier for the Euro’s other rivals to advance against it.
However, against the Pound the Euro remains fairly appealing. This is because the Pound is being hit particularly hard by coronavirus pandemic and Brexit fears.
Pound Euro (GBP/EUR) Exchange Rate Volatility Could Worsen on Dire Situation
Britain’s situation is particularly unusual, and it may get worse before it gets better.
The Pound could become especially unappealing if it appears likely that there will be a cliff-edge scenario at the end of the month.
If the Brexit transition period ends without a UK-EU deal of kinds in place, Britain’s economy could be hit hard by a sudden loss of international connections for British businesses.
The Pound could be throttled further in this scenario. What’s more, developments with this new strain of the coronavirus pandemic will be closely watched and could mean even more Pound losses.
The Euro will remain influenced by movement in rival currencies. If the Pound continues to fall, the Euro will likely gain against it.
However, if the Euro’s biggest rival the US Dollar strengthens on safe haven demand, the Euro may weaken as a result.
Even with a lack of data, it could be a highly volatile week for the Pound Euro exchange rate.