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Euro Pound Exchange Rate Slides as Bank of England (BoE) Policymakers Avoid Pessimism

Euro Pound Exchange Rate Fall Back as Euro’s Rivals Recover 

A lack of solid news to influence Euro (EUR) movement means that the Euro Pound (EUR/GBP) exchange rate is falling more easily this week. The Pound (GBP) is recovering from lows as markets digest comments from Bank of England (BoE) officials. 

After opening last week at the level of 0.8903, EUR/GBP briefly dipped to a four month worst of 0.8880. The pair then rebounded, ultimately closing the week a pence higher at the level of 0.9009. 

Since markets opened this week though, EUR/GBP has been sliding again. At the time of writing on Tuesday, EUR/GBP trends in the region of 0.8969. 

The Pound’s recovery may be limited though. Negative interest rate speculation persists. 

Euro (EUR) Exchange Rates Weighed as Rivals Rebound 

The Pound and US Dollar (USD), two of the Euro’s biggest rivals, have seen rebounds in demand this week. 

The Euro is particularly sensitive to the US Dollar’s movement. Expectations for more fiscal stimulus in the US, combined with global coronavirus jitters, boosted the US Dollar’s appeal as a safe haven. 

The Euro has seen its longest loss-streak against the US Dollar in months amid the US Dollar’s rebound. This is making it easier for the Pound to register gains against the Euro. 

However, analysts believe the US Dollar’s rebound potential is limited. The Federal Reserve remains dovish, giving investors little reason to keep buying the low-yielding US currency. 

Pound (GBP) Exchange Rates Recovering despite Negative Rate Cut Speculation 

The Pound continues to recover this morning. This is despite persisting concerns that the Bank of England (BoE) could introduce negative interest rates soon. 

Yesterday, Bank of England (BoE) policymaker Silvana Tenreyro argued that there were upsides to negative interest rates. Today however, BoE Governor Andrew Bailey has been expressing caution over their usage. 

The bank’s hesitance to use negative rates is helping the Pound to recover slightly. However, gains are still limited as the bank’s officials remain highly concerned about the health of Britain’s economy overall. 

BoE officials have been signalling that some kind of easing policy is likely soon. 

Euro Pound (EUR/GBP) Exchange Rate Could Climb Again if Euro Rivals Run Out of Steam 

The Pound and US Dollar are both recovering, which is weighing on the Euro. However, some analysts believe that both GBP and USD rebounds could be limited. 

The US Dollar could weaken again if the Federal Reserve remains dovish and US data still shows weakness. Meanwhile, the Pound could weaken again if other Bank of England (BoE) comments boost negative rate speculation. 

As the Eurozone outlook is comparatively resilient, EUR/GBP would climb more easily again if the Pound was unappealing. 

Upcoming Eurozone data could support the Euro further if it impresses. Tomorrow will see the publication of German wholesale prices and Eurozone industrial production. 

On the other hand, any surprising comments on the European Central Bank’s (ECB) outlooks could also influence Euro direction. 

Euro Pound exchange rate investors will be closely watching tomorrow’s expected speech from ECB President Christine Lagarde.