Euro to Pound Exchange Rate Sustains Gains after Last Week’s Surge
While the Pound (GBP) attempted a recovery from its plummet last week, the Euro to Pound Sterling (EUR/GBP) exchange rate has been able to avoid notable losses. The Euro (EUR) remains broadly appealing so is holding most of last week’s gains.
Last week saw EUR/GBP rocket as no-deal Brexit fears throttled the Pound. EUR/GBP opened the week at the level of 0.8916 and the pair gained an impressive three pence throughout the week overall, closing the week at the level of 0.9257.
EUR/GBP also touched on a high of 0.9287 last Friday, the pair’s best level in about half a year since March.
Today, EUR/GBP has slipped lower and currently trends in the region of 0.9219. This is still well up on last week’s levels though.
Euro (EUR) Exchange Rates Steady despite Slowing Factory Recovery
Investors continued to find the Euro appealing when markets opened this week. The Euro is appealing due to the Eurozone’s handling of the coronavirus pandemic compared to other major economies.
This is despite signs that the Eurozone’s economic recovery may be slowing. While the latest Eurozone industrial production data beat forecasts, it still indicated to investors that a v-shaped recovery was becoming less likely.
The Euro found a little support on news that the relatively optimistic European Central Bank (ECB) has already taken potential local lockdowns into account for its forecasts. According to ECB Chief Economist Philip Lane:
‘There is no indication that we are hitting the lower bound with rates,’
Pound (GBP) Exchange Rate Recovery Limited amid Brexit Uncertainty
The Pound saw a limited rebound attempt this week, following the huge losses seen last week.
Investors reassessed positions on the Pound as they awaited more Brexit developments. Backlash towards the UK government’s plans to rewrite the Brexit withdrawal agreement continued to build, leading to hopes that the government could be forced to soften its position.
As a result, investors have been buying the Pound slightly ahead of UK Parliament’s vote on the bill.
Some analysts believe Sterling has further to fall, but is taking a breather today. Seema Shah, Chief Strategist at Principal Global Investors, said:
‘There has been a decent selloff but I think it has further to go,
The thinking perhaps is that this (bill) is just a bargaining tool and that it won’t go through parliament – this may be supporting Sterling.’
Euro to Pound (EUR/GBP) Exchange Rate Awaits Brexit and Bank of England (BoE) News
The Euro to Pound exchange rate could fall further from its best levels in the coming sessions, depending on how the Brexit process develops.
If the UK government softens its controversial position on the Brexit withdrawal agreement, the Pound could claw back some of last week’s huge losses.
On the other hand though, a lack of optimistic developments could mean lasting no-deal Brexit fears and lasting Pound weakness.
This could also leave EUR/GBP more vulnerable to upcoming data. Eurozone sentiment data from ZEW and UK job markets stats will be published tomorrow.
On top of Brexit news and data, the Bank of England’s (BoE) September policy decision on Thursday will be closely watched.
If the bank signals more potential monetary policy, the Euro to Pound (EUR/GBP) exchange rate could remain near its highest levels.