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Euro to Pound Sterling Exchange Rate Avoids Further Losses as Eurozone Outlook Steadily Improves

Euro to Pound Exchange Rate Movement Steadies after Mid-Week Tumbles 

Despite a lack of particularly strong support for Sterling (GBP), the Euro to Pound Sterling (EUR/GBP) exchange rate has fallen this week. A recovery is possible on the Eurozone’s strong economic outlook, but if signs of weakness emerge there may instead be more losses ahead. 

After opening this week at the level of 0.9092, EUR/GBP briefly jumped higher. ERU/GBP touched on a high of 0.9170 – the best level for the pair in a quarter, since March. 

Since then though, EUR/GBP has been tumbling. Investors took profit from the pair’s highs and EUR/GBP now trends below the week’s opening levels. 

EUR/GBP briefly touched on a fortnight low of 0.9004 overnight. The pair trends just above those levels at the time of writing, investors seeming hesitant to sell it much lower. 

Euro (EUR) Exchange Rates Steady as Eurozone Data Continues to Impress 

The Euro has been a little weaker this week. It is slipped against major rivals like the Pound and the US Dollar (USD), as investors buy them back from their cheapest levels. The Euro is also being hit slightly by political instability in France. 

However, the Euro’s appeal remains fairly strong overall. 

The Euro’s losses have been more due to recovering rivals than any weakness in the Euro outlook. In fact, Eurozone data continues to impress investors. 

Today saw the publication of the Eurozone’s final June services and composite PMI results. All notable prints came in even higher than the already forecast-beating projections. France’s data even showed decent 51.7 overall activity. 

With the Eurozone’s economic activity only contracting at 48.5 instead of the projected 47.5, investors are even more optimistic about the resilience of the Eurozone economy amid the coronavirus pandemic. 

Pound (GBP) Exchange Rates Rebound and Brexit Speculations 

Earlier this week, investors bought the Pound (GBP) back from its cheapest levels. The currency was seen as undervalued, so the new quarter began with some Pound-buying. 

Investors have been holding onto Sterling since then, thanks partially to speculation that there could be Brexit developments in the coming month. 

According to Analysts at ING Bank: 

‘Ahead of a new round of talks next week, the two parties have reportedly softened their stances on a few issues and took steps towards a general compromise,’ 

As a result of some faint Brexit optimism, the Pound was able to hold most of this week’s gains. However, its advances are slow, as the latest UK services PMIs continue to indicate that Britain’s economy could be in for months more coronavirus uncertainty. 

Euro to Pound (EUR/GBP) Exchange Rate Could Tumble on Optimistic Brexit News 

Investors may be hesitant to buy the Pound (GBP) too much more, but there is still potential for the Euro to Pound (EUR/GBP) exchange rate to fall further. 

The Pound outlook remains weighted by concerns over Britain’s coronavirus and Brexit situations. What’s more, the Pound is likely to become increasingly Brexit focused going forward. 

According to Viraj Patel, FX and Global Macro Strategist at Arkera, Sterling may be in for more volatility: 

‘The next 3 months are likely to see the Pound subject to heightened Brexit headline risks and it’s not unusual to see FX markets tentatively price in some premium for future expected volatility,’ 

The Euro may be able to avoid losses if Eurozone data continues to impress though. 

Next week will see the publication of Eurozone trade data and the European Central Bank’s (ECB) July policy decision. 

If these events impress investors, the Euro to Pound (EUR/GBP) exchange rate is more likely to remain near highs.