Euro Pound Sterling (EUR/GBP) Exchange Rate Muted on Eurozone Recession Fears
The Euro Pound Sterling (EUR/GBP) exchange rate remained flat, leaving the pairing trading at around £0.8315.
The single currency was left under pressure at the start of the week as worries about weakening Eurozone growth weighed on the currency.
The new threat to the global economy, Covid-19 continued to weigh on markets, with Eurozone investors fearing the bloc will be dragged into a recession.
Added to this, the German economy stagnated in the final quarter of 2019, which saw renewed fears of a recession.
Commenting on the risk of coronavirus, Societe Generale’s manager of currencies, Kyosuke Suzuki stated:
‘Coronavirus is increasingly looking like a long-term issue and thus, at least for currency markets, it will be playing second fiddle.
‘In contrast, sentiment on the euro is becoming clearer, with weak economic fundamentals helping to push it down.’
Added to this, at the end of last week’s session, EUR hit a 33-month low against the US Dollar (USD). Since the start of January, EUR has slumped by around 2.3%.
Sterling (GBP) Flat as UK and EU Will ‘Rip Each Other Apart’
Last week, the Pound remained under pressure as traders fretted about the future trade relationship between the UK and European Union.
On Sunday, France warned the UK to expect a battle with the bloc in post-Brexit trade talks, dampening GBP sentiment.
The country’s Foreign Minister, Jean-Yves Le Drian said the two sides would ‘rip each other apart’.
He also added that the UK’s goal to achieve a free trade deal by the end of 2020 would be tough.
Speaking at a security conference on Sunday, Le Drian stated:
‘I think that on trade issues and the mechanism for future relations, which we are going to start on, we are going to rip each other apart.
‘But that is part of negotiations, everyone will defend their own interests.’
Euro Pound Outlook: Will Strong UK Labour Market Buoy GBP?
Looking ahead to Tuesday, the Pound (GBP) could rise against the Euro (EUR) following the release of UK labour market statistics.
If December’s unemployment remains at current lows, and wage growth rises higher than expected, GBP will jump.
Meanwhile, disappointing German data could send the single currency lower.
If Germany’s ZEW economic sentiment index falls further than expected in February, the Euro Pound (EUR/GBP) exchange rate will slump.
