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Euro Pound Exchange Rate Recovers and Advances as UK’s Economic Outlook Still Gloomy

Euro Pound Exchange Rate Advancing as Eurozone PMIs Less Disappointing than UK 

Despite economic recovery hopes and market sentiment boosting the Pound (GBP) in the middle of the week, the Euro Pound (EUR/GBP) exchange rate has seen a strong recovery over the past day. The pair continues to climb on Friday and may sustain gains this week. 

Since opening this week at the level of 0.8890, EUR/GBP has seen mixed movement. Yesterday, the Pound’s strength pushed EUR/GBP lower to a four-month-low of 0.8832. 

EUR/GBP has been recovering and advancing again since last night though. At the time of writing on Friday afternoon, EUR/GBP is trending near the level of 0.8940. This isn’t far below the week’s best levels. 

Unless Britain’s coronavirus situation shows more solid signs of improvement, the Pound may be in for further weakness in the coming week. 

Euro (EUR) Exchange Rates Benefit from Rival Weakness as Eurozone Data Decent 

The Euro (EUR) is a currency that is often influenced by the strength of major rival currencies. The Pound and US Dollar (USD) are two of the Euro’s biggest rivals. 

With the Pound weakening on poor UK data today, the Euro is benefitting and advancing. 

Investors were even more willing to buy the Euro over the Pound, as today’s Eurozone PMI projections were generally decent. 

Chris Williamson, Chief Business Economist at IHS Markit, noted that while the downturn is less severe than the one seen last year, a double-dip recession in the Eurozone was still likely. 

Pound (GBP) Exchange Rates Slip as UK Ecostats Disappoint 

Earlier in the week, the Pound was benefitting from UK economic recovery hopes. However, Friday’s stats and government uncertainty over how long coronavirus lockdowns could last left the British currency falling again. 

Friday saw the publication of key UK retail sales results from December and PMI projections for January. Both reports fell well short of expectations, worsening fears over the pandemic’s impact on Britain’s economic activity. 

According to Ruth Gregory, Senior UK Economist at Capital Economics, the drop in Britain’s PMIs indicate that Britain’s economy could be hit more than expected from January’s lockdown. She said: 

‘The drop in the composite flash PMI from 50.4 in December to 40.6 in January was sharper than the consensus forecast for a fall to 45.5. And it was far bigger than the fall in the flash PMI in the Eurozone from 49.1 to 47.5, as Brexit and January’s COVID-19 lockdown measures weighed on the UK index.’ 

Euro Pound (EUR/GBP) Exchange Rate Could Remain High Without Rise in Sterling Appeal 

The Euro to Pound exchange rate could sustain gains and keep advancing over the coming sessions. It depends largely on the strength of the Pound. 

If Britain’s coronavirus situation remains concerning and infection and death rates remain high, the Pound is unlikely to have much ground to strengthen. 

On the other hand, if infections show more signs of falling and upcoming UK data impresses investors, the Pound could push EUR/GBP lower again. 

Tuesday will see the publication of Britain’s latest job market stats. This could be one of the most influential reports of the week. 

Eurozone data to keep an eye out for includes Wednesday’s German consumer confidence stats, Thursday’s Eurozone confidence figures, and French and German growth rate results on Friday. 

Overall, coronavirus pandemic developments and Pound strength are most likely to influence the direction of the Euro Pound (EUR/GBP) exchange rate next week.