EUR/GBP Exchange Rate Rangebound as Sterling Investors Brace for Lockdown News
The Euro to Pound (EUR/GBP) exchange rate held steady this morning, with the pairing currently trading around £0.872.
The Pound (GBP) struggled to gain on the single currency today with the UK Government expected to announce a three-week extension to the coronavirus lockdown later on today.
Yesterday saw Health Secretary Matt Hancock confirm that the lockdown had had a positive effect on curbing the spread of Covid-19 infections. But Mr. Hancock also warned that ‘we will not lift these measures until it is safe to do so.’
Sterling traders are feeling increasingly jittery about the UK economy, with the lockdown hindering business activity and effectively stalling the nation’s growth.
The Office for Budget Responsibility’s (OBR) dire prediction of a -35% decline in Britain’s GDP in the second quarter failed to help matters, which Chancellor Rishi Sunak described as ‘deeply troubling’.
GBP investors are also becoming increasingly jittery as UK-EU Brexit negotiations reconvene despite the ongoing coronavirus crisis.
However, with no signs of an extension beyond 31st December, fears of a no-deal Brexit have returned to haunt British markets.
Richard Pace, a Markets Analyst at Thomson Reuters, commented:
‘There’s hope on both sides of the channel that the Brexit negotiations postponed by the coronavirus can restart next week, but the contentious topic of fishing rights in UK waters could scupper those talks and raise the chance of Britain departing the EU at the end of 2020 with no deal.’
Euro (EUR) Steady as German Begins to Ease Lockdown Measures
The Euro (EUR) held steady against the Pound (GBP) today after the release of March’s German Harmonised Index of Consumer Prices report, which confirmed consensus and held at 1.3%. The month-on-month CPI, however, increased by 0.1%.
However, while global coronavirus cases are fast approaching 2.1 million there are positive signs, with Germany being the latest to announce that it would be easing its lockdown measures with some ‘non-essential’ shops being allowed to re-open.
German Chancellor Angela Merkel warned that the nation would have to ‘proceed with extreme caution’, also adding that Germany was now ‘walking on thin ice’.
We could see the Euro (EUR) edge higher against the Pound (GBP) today if countries in the Euro-area continue to ease their lockdown measures as this would increase the chances of the Eurozone’s economic recovery in the near-term.
European Commission President Ursula von der Leyen, however, highlighted the need for clear communication across the bloc, saying:
‘This is not – it is not – a signal that confinement, containment measures can be lifted as of now… A lack of co-ordination in lifting restrictive measures risks having negative effects for all member states and creating political friction.’
EUR/GBP Outlook: IMF Meeting in Focus
Euro (EUR) investors will be looking ahead to tomorrow’s International Monetary Fund (IMF) meeting, which will determine how its member countries will tackle the financial fallout of the coronavirus pandemic.
Any gloomy predictions for the Eurozone’s economy going forward, however, would prove EUR-negative.
The EUR/GBP exchange rate will also remain sensitive to the UK’s coronavirus developments this week, with any indications that Downing Street could extend its lockdown further damaging the British economy and weakening the value of Sterling.