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Euro Pound (GBP/EUR) Exchange Rate Rises as Great Lockdown Recession Fears Weaken Sterling

GBP EUR exchange rate outlook

EUR/GBP Exchange Rate Edges Higher as OBR Predicts -35% Contraction in UK GDP

The Euro to Pound (EUR/GBP) exchange rate rose by 0.3% as sinking oil prices have increased anxieties over the Great Lockdown recession for 2020 and have weakened the appeal of the vulnerable Sterling this morning. The pairing is currently trading around £0.873.

Daniel Hynes, an Analyst at the Australia and New Zealand Banking Group, comments

‘This is a demand driven market at the moment and clearly lockdown measures across most of the world are keeping that under pressure.

‘We expect to see prices remain relatively volatile.’

Pound (GBP) investors have also become increasingly nervous after Chancellor Rishi Sunak admitted he was ‘deeply troubled’ by the OBR’s warning of a -35% fall UK GDP in the second quarter due to the nationwide lockdown.

The OBR also warned that British unemployment could also rise by more than 2 million.

As a result, the Pound’s (GBP) one-month highs against the Euro (EUR) have slipped on fears that the UK’s economic outlook could be a lot darker than previously expected.

Mr Sunak said in yesterday’s statement:

‘This is going to be hard. Our economy is going to take a significant hit and as I’ve said before that’s not an abstract thing. People are going to feel that in their jobs and in their household incomes.’

Euro (EUR) Rises as Italy and Austria Take Cautious Steps Out of Lockdown

The Euro (EUR) edged higher against the Pound (GBP) after EU countries begin to take first cautious steps out of the coronavirus lockdown, with countries like Italy and Austria reopening selected shops.

Austria’s Chancellor Sebastian Kurz said the country was now ‘on the right track’, adding:

‘We are now taking the first steps back to a new normality. But the crisis is far from over.’

Consequently, the Euro rose against Sterling as hopes continue to grow that heavily hit countries like Italy and Spain could be on their way to recovering from the peak crisis of the coronavirus.

The EUR/GBP exchange rate’s gains, however, could be short-lived after the International Monetary Fund (IMF) announced that the Eurozone economy will crash in 2020.

French Finance Minister Bruno Le Maire also said that France could see a growth contraction of -8%, which has since left many single currency traders wary of an unprecedented strain on the bloc’s economy following the Covid-19 crisis.

EUR/GBP Forecast: Could Europe’s Easing Lockdown Measures Boost the Euro?

The Euro’s (EUR) could be compromised this week if the Eurozone’s economic situation continues to deteriorate.

However, with several key nations within the Euro-area beginning to open up following lockdown, single currency traders will continue to monitor the overall effect of the coronavirus has had on the Eurozone economy.

Pound (GBP) investors will be awaiting tomorrow’s speech by Silvana Tenreyro, a member of the Bank of England’s (BoC) monetary policy committee. Any dovish comments about the UK economy would prove Pound-negative.

The EUR/GBP exchange rate will remain sensitive to the UK’s approach to the coronavirus this week, with any further signs that the nation’s economy could sink further in coming months weakening Sterling.