EUR/GBP Exchange Rate Falls despite Concerns Over UK Negative Interest Rates
The Euro to Pound (EUR/GBP) exchange rate fell by -0.3% today, with the pairing currently trading around £0.903.
Sterling edged higher today after Prime Minister Boris Johnson revealed a three-tier system to help limit the spread of the coronavirus.
As a result, Liverpool has entered the strictest of measures, while other areas remain in tier-2 or tier-1.
Mr Johnson said:
‘We want to create the maximum possible local consensus behind this more severe local action, so in each area, we will work with local government leaders on the additional measures which should be taken. This could lead to further restrictions on the hospitality, leisure, entertainment or personal care sectors. But retail, schools and universities will remain open.’
Meanwhile, concerns for the British economy have risen after the Bank of England (BoE) dropped hints of taking interest rates into negative territory.
This follows reports that the Bank had emailed various other banks requesting information about how prepared they were for negative interest rates.
Consequently, Sterling investors are remaining cautious as the British economy is set upon by months of uncertainty as we heard towards the winter months – and Brexit.
Euro (EUR) Sinks as Concerns Grow over Eurozone’s Largest Economy
The Euro (EUR) struggled today after Germany’s Wholesale Price Index for September failed to impress, rising from -0.4% to 0% month-on-month, while year-on-year it fell by -1.8%.
As the Eurozone’s largest economy shows signs of flagging, EUR investors have remained cautious as the Covid-19 infection rate continues to rise throughout much of Europe.
Christine Lagarde, the European Central Bank’s President, has also continued to call for European governments to prolong fiscal support.
This has sparked concerns that the Eurozone’s economy could be worse off than previously expected.
Meanwhile, demand for the Euro has risen somewhat, however, as the US Dollar – the Euro’s largest competitor – is under pressure as political uncertainties rage over November’s historic election.
GBP/EUR Forecast: Could Positive Eurozone Data Boost the Single Currency?
Pound (GBP) investors will be paying close attention to tomorrow’s release of September’s Claimant Count Change.
Any significant signs of a downturn in UK unemployment would drag down Sterling.
Tomorrow will also see the release of August’s UK ILO Unemployment Rate. If this shows rising unemployment, then GBP would suffer.
Euro (EUR) traders will be paying close attention to tomorrow’s German and Eurozone ZEW Survey reports on economic sentiment. If these paint a bleak picture for the Eurozone economy, then the single currency could sink.
The EUR/GBP exchange rate will remain sensitive to Eurozone economic and Covid-19 data this week.
Any indications that the Eurozone is faring better-than-expected throughout the coronavirus pandemic would boost the Euro.