Euro to Pound Exchange Rate Sliding as Market Sentiment Dampened Again
The Euro to Pound (EUR/GBP) exchange rate is sliding today. While the Euro (EUR) is being weighed by a lack of progress on EU fiscal policy, the Pound’s (GBP) gains are limited. Movement is being driven more by Euro weakness than anything supporting the Pound.
Following last week’s tumble from 0.8951 to 0.8804, EUR/GBP movement has been more mixed this week so far.
EUR/GBP advanced slightly yesterday. However, today the Euro’s weakness has left the pair nearer the week’s opening levels once again.
Market disappointment in the EU’s inability to reach a decision on coronavirus fiscal policy partially caused the move. Stronger safe haven demand and a weaker US Dollar (USD) played a part as well.
Euro (EUR) Exchange Rates Unappealing as EU Nations Fail to Agree on Fiscal Stimulus
Euro demand was fairly resilient earlier in the week. The shared currency benefitted from market hopes that the coronavirus pandemic was slowing, as well as hopes that the EU could soon agree to EU-wide stimulus measures.
However, yesterday’s Eurogroup meeting didn’t go as well as some investors had expected. The meeting of Eurozone finance ministers ended without a sweeping deal after 16 hours of talks.
Eurogroup President Mario Centeno said ‘We came close to a deal but we are not there yet’.
While there is speculation that Germany’s opposition to more sweeping stimulus is softening slightly, The Netherlands continues to oppose proposed measures.
Pound (GBP) Exchange Rates Jittery as Boris Johnson Remains in Hospital
UK Prime Minister Boris Johnson was admitted to hospital for developing coronavirus symptoms at the beginning of the week. Markets have become more anxious since Mr Johnson was admitted into intensive care on Monday evening.
There are concerns over Prime Minister Johnson’s health and the potential impact it could have on Britain’s government. The stand-in government reportedly needs the entire cabinet to agree before taking new action.
According to Yohay Elam, Analyst at FXStreet:
‘Updates from St. Thomas hospital in central London are few and far apart – keeping Brits on edge and in markets, holding GBP/USD in a tight range after initially falling in response to Johnson’s ICU admittance.’
Euro to Pound (EUR/GBP) Exchange Rate Outlook Remains Dominated by Coronavirus
The Eurogroup is expected to meet again tomorrow, in the hopes of reaching some kind of agreement on EU-wide fiscal policy. Meanwhile, UK Prime Minister Boris Johnson remains in intensive care.
With data still taking a backseat, the domestic political reactions to the coronavirus pandemic are the focus for Euro and Pound investors.
The Euro may struggle to see much support if the EU’s lack of fiscal policy continues to disappoint. On the other hand though, if tomorrow’s Eurogroup meeting is much more productive and leads to any fiscal stimulus, the Euro could strengthen.
For now, Sterling will focus on developments regarding Boris Johnson’s condition. Yohay Elam at FXStreet said:
‘Coronavirus headlines and especially updates on the PM’s condition are set to dominate trading during the day. Any improvement could boost the pound while worrying news could weigh on it.’
Market safe haven demand is likely to limit demand for both currencies. However, the Euro’s appeal as a safe haven could be boosted by Eurozone fiscal stimulus and this could lead to further Euro to Pound (EUR/GBP) exchange rate gains.