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Euro to Pound (GBP/EUR) Exchange Rate Sinks as Boris Johnson Returns to Downing Street

EUR/GBP Exchange Rate Falls as UK Edges Closer to ‘End of the First Phase’ of Covid-19 Conflict

The Euro to Pound (GBP/EUR) exchange rate fell by -0.4% today, with the pairing currently trading around £0.872.

The Pound (GBP) continued to edge higher today after Prime Minister Boris Johnson returned to Downing Street on Sunday evening.

Boris Johnson also announce that the UK was now ‘coming to the end of the first phase of his conflict’.

Consequently, this sparked hopes that that the Government could begin to take steps towards easing nationwide lockdown measures.

British Foreign Secretary Dominic Raab, who has been deputising for Boris Johnson, was critical of prematurely lifting lockdown measures, saying:

‘We’ve got to make sure of two things: first of all we don’t risk a second spike, for all the reasons we’ve discussed. Secondly, that overall this package doesn’t allow the coronavirus to get back hold, to spread more widely and to undo all the progress we’ve made, or the sacrifices so many people have made.’

Looking ahead, today’s lack of UK data will leave Sterling investors awaiting the publication of the UK Government’s coronavirus timetable.

If Boris Johnson hints at easing lockdown measures, then we could see the GBP/EUR rise.

Euro (EUR) Falls as German Business Morale Collapses

The Euro (EUR) struggled against the Pound (GBP) after last week’s slew of dire Eurozone economic data, which saw German business moral collapse in the wake of the coronavirus pandemic.

IFO President Clemens Fuest commented:

‘Sentiment at German companies is catastrophic. The coronavirus crisis is striking the German economy with full fury … Demand for industrial products has collapsed.’

Meanwhile, some Euro investors are becoming more optimistic about the Eurozone’s economy after Italy, one of the most heavily hit by the coronavirus, is beginning to outline lockdown easing measures.

With the Eurozone’s economy teetering on the brink of a recession and French President Emmanuel Macron warning of an ‘unprecedented collapse’, the EUR/GBP exchange rate has remained subdued today.

IHS Markit was also notably downbeat in its assessment last week, saying:

‘The eurozone economy suffered the steepest falls in business activity and employment ever recorded during April as a result of measures taken to contain the coronavirus outbreak.’

EUR/GBP Forecast: Could the Single Currency Continue to Fall on Dire German Data?

Euro (EUR) investors will be looking ahead to Wednesday’s release of April’s flash German harmonized inflation report. If this significantly falls below consensus, then we could see the single currency fall deeper against the Pound.

The EUR/GBP exchange rate will remain sensitive to announcements from No.10 due to a lack of UK economic data. However, any signs that the UK could begin to ease lock down measures would prove Pound-positive.