Euro to Pound Exchange Rate Struggles to Keep Benefitting from Safe Haven Demand
Despite the UK government’s toughened tone on the coronavirus pandemic leading to Pound (GBP) weakness, the Euro to Pound (EUR/GBP) exchange rate is struggling to hold its ground today. The Euro (EUR) has been weakening on the latest Eurozone data and US Dollar (USD) strength.
EUR/GBP saw another week of strong performance last week as the Euro capitalised on safe haven demand. EUR/GBP opened the week at the level of 0.8653 and climbed a considerable four pence, closing the week at 0.9064.
The Euro saw strong performance yesterday and this morning, briefly pulling EUR/GBP to a 6-month-best of 0.9146. While the Euro has been unable to hold its ground, EUR/GBP is still trending above the week’s opening levels in the region of 0.9108.
Has the Euro’s safe haven appeal run dry? Even as the Pound weakens today, the Euro is slipping across the board as stronger rivals and gloomy data dampen the shared currency’s outlook.
Euro (EUR) Exchange Rates Slip as Eurozone Confidence Plummets
The Euro’s bullish run may finally have run out of steam today. The latest Eurozone confidence data is gloomy, and the Euro’s biggest rival the US Dollar (USD) is surging. These factors combined are keeping pressure on the shared currency.
This morning saw the publication of ZEW’s March economic sentiment index data for both Germany and the Eurozone. Both figures saw significant contractions, coming in well lower than expected in all prints.
German and Eurozone economic sentiment both came in at –49.5. Germany’s current conditions print worsened to –43.1.
Plummeting confidence started to have a stronger impact on the Euro, causing it to fall further as its rival the US Dollar benefitted from safe haven demand instead.
Today’s weaker Euro strength follows weeks of surges for the shared currency. Due to its popularity as a funding currency and the weakness of the US Dollar (USD), the shared currency had benefitted from safe haven demand instead.
Pound (GBP) Exchange Rates Struggle to Advance amid Domestic Coronavirus Jitters
The Pound has seen fairly bearish trade this week so far. Concerns are rising over the potential impact of the coronavirus Covid-19 on Britain’s economy. These factors kept the Pound from capitalising on the Euro’s latest weakness.
Concerns only deepened today, as businesses reacted to the tougher stance the government took to the virus last night. Many businesses, including large cinema chains, announced they would close.
And Everyman has also moved to shut its venues, pretty much marking the end of all cinema in the UK and Ireland for the forseeable future. https://t.co/tGrgSJs1Ci
— Mark Sweney (@marksweney) March 17, 2020
Layoffs and concerns over the survivability of smaller businesses also made investors anxious and weighed on the Pound’s appeal.
On top of all this, the government’s tougher stance on Covid-19 has led to fresh Bank of England (BoE) interest rate cut bets. Overall, plenty of pressure and coronavirus fear in the Pound is keeping its strength limited.
Euro to Pound (EUR/GBP) Exchange Rate Could Tumble if Euro Appeal Fades
For now, the Euro is avoiding significant losses due to weakness in other currencies, including the Pound.
However, if the US Dollar continues to surge and Eurozone data continues to disappoint, the shared currency could be in for lasting weakness.
Tomorrow’s European session will see the publication of the Eurozone’s January trade balance data and February inflation rate results.
While these are unlikely to impact the coronavirus outlook, poor inflation data could dampen perceived Eurozone resilience. It could cause European Central Bank (ECB) easing speculation and Euro weakness if it disappoints.
The strength of the US Dollar (USD) will remain a key factor in the Euro’s appeal as well.
Of course, continued developments in the coronavirus pandemic will remain the key focus overall. If the UK government stance gets even tougher for example, the Euro to Pound (EUR/GBP) exchange rate’s potential to fall will be limited.