Euro to Pound Exchange Rate Avoiding Losses but Struggling to Climb Higher
The Euro to Pound Sterling (EUR/GBP) exchange rate is slipping slightly today. The Euro (EUR) is weakening as demand for safe haven rivals rises, but the Pound (GBP) is struggling to capitalise.
EUR/GBP continues to trend fairly close to its best levels overall, despite today’s jittery performance. Last week saw EUR/GBP climb from the level of 0.8973 to 0.9052 as the Pound’s outlook became increasingly gloomy.
This week so far, EUR/GBP has been struggling to hold its ground but is not falling far either. EUR/GBP is trending near the level of 0.9028 at the time of writing.
The pair isn’t far from a high of 0.9122 seen on Monday, the best level for the pair since March.
Could upcoming Eurozone data bolster the Euro’s appeal, or will coronavirus fears leave it shedding ground to safer rivals?
Euro (EUR) Exchange Rates Lack Drive as Analysts Increasingly Urge Caution
The Euro has seen weeks of strong performance lately. This is due to hopes that the Eurozone economy will rebound from the coronavirus pandemic, as well as weakness in rivals like the Pound and US Dollar (USD).
However, the Euro’s appeal has softened this week. As markets become more cautious about the possibility of a ‘second wave’ of coronavirus infections, the Euro’s safe haven opponents are rising.
This is keeping pressure on the Euro this week, making it harder for the shared currency to hold its ground.
On the other hand, cautious expectation that the worst is already past has limited the Euro’s losses. According to analysts at Commerzbank:
‘The risk of a second wave worldwide has not been banished yet and can quickly push the FX market back into the old pattern of `risk aversion is on the up, let’s buy safe havens; i.e., the US Dollar’ – even under the assumption that the lockdowns imposed in that case would probably be much less severe than the first time round,’
Pound (GBP) Exchange Rates Increasingly Jittery as Coronavirus and Brexit Dominate Outlook
While the Euro is weaker today, investors have been hesitant to buy the Pound either.
Concerns over the coronavirus and Brexit process continue to cast heavy shadows over Britain’s economic and political outlooks.
This broad domestic uncertainty has meant Sterling is struggling to benefit from global shifts in sentiment, either.
However, more market demand for safer currencies is also weighing on the Pound. Analysts believe the Pound is becoming increasingly correlated with risk-sentiment.
According to Kamal Sharma, Currency Analyst at Bank of America (BofA):
‘The Pound increasingly resembles the more liquid emerging market currencies rather than a core G10 currency,’
Euro to Pound (EUR/GBP) Exchange Rate May be Driven by Data or Rival Strength
Investors are hesitant to buy the Euro much due to stronger demand for its rival the US Dollar (USD). Meanwhile, concern about Britain’s coronavirus and Brexit outlooks are weighing on the Pound.
With these uncertainties causing jittery movement in the Euro to Pound exchange rate, investors may look ahead to upcoming data.
Tomorrow will see the publication of German consumer confidence data and UK distributive trades data from CBI.
They will be followed on Friday by French consumer confidence data. Any surprising comments from European Central Bank (ECB) officials in the coming days could also cause movement.
Coronavirus developments will of course remain a focus for both currencies.
If the Eurozone’s coronavirus situation remains optimistic despite ‘second wave’ fears, the Euro to Pound (EUR/GBP) exchange rate is more likely to hold its ground.