EUR/GBP Exchange Rate Rises as Eurozone Growth Falls to Record Lows
The Euro to Pound (EUR/GBP) exchange rate fell by -0.6% today, with the pairing currently trading around £1.18.
The Euro (EUR) suffered today following a worse-than-expected contraction in the Eurozone’s GDP figure for the second quarter. The figure fell from -3.6% to -12.1, leaving many single currency traders concerned for the bloc’s economy in the months ahead.
Ulas Akincilar, head of trading at the online trading platform, INFINOX, was downbeat in his assessment:
‘The fallout from the virus now poses a major challenge not just to the healthcare systems and the economies of the EU member states – it’s also a threat to the bloc’s integrity.’
Eurostat also said in its statement:
‘These were by far the sharpest declines observed since time series started in 1995.’
Today also saw the French GDP fall from -5.3% to -13.8%. Consequently, the bloc’s economic outlook as dimmed as several of its strongest economies have suffered from the coronavirus pandemic.
Pound (GBP) Edges Higher Despite Rising Concerns for Britain’s Coronavirus Situation
The Pound (GBP) benefited from a stronger-than-expected Nationwide House Prices index today, with the figure rising to 1.7% in July. As a result, GBP investors have become more optimistic about Britain’s economic recovery.
Nevertheless, Nationwide warned of a ‘false dawn’ owing to pent-up demand.
Robert Gardner, Nationwide’s chief economist, commented on the report:
‘The rebound in activity reflects a number of factors. Pent-up demand is coming through, where decisions taken to move before lockdown are progressing.
‘Behavioural shifts may be boosting activity, as people reassess their housing needs and preferences as a result of life in lockdown.
‘However, there is a risk this proves to be something of a false dawn.’
Meanwhile, Prime Minister Boris Johnson has announced that the scheduled easing of England’s lockdown on the 1st of August would be postponed. This follows several northern areas of England undergoing further lockdowns as Covid-19 cases continue to rise.
EUR/GBP Forecast: Could the Euro Sink on a Gloomy Outlook for the Eurozone’s Economy Next Week?
Euro (EUR) investors will be looking ahead to Monday’s release of the Eurozone’s Markit Manufacturing PMI for July. If this holds at 51.1, then we could see the single currency as concerns continue to grow over whether the bloc can recover from the coronavirus pandemic.
Pound (GBP) investors, meanwhile, will also be awaiting the UK’s Manufacturing PMI for July, which is expected to remain unchanged at 53.6. However, any improvement in the UK’s manufacturing sector would prove GBP-positive.
The EUR/GBP exchange rate could continue to fall next week if the Eurozone’s economic picture remains bleak for the month’s ahead. However, any indications of a breakthrough in UK-EU Brexit negotiations would further buoy the Pound.