Euro to Pound Exchange Rate Climbing despite Lack of Solid Eurozone Support
The Euro to Pound Sterling (EUR/GBP) exchange rate is bouncing back from its worst levels today, as the Euro benefits from market uncertainty. The Pound’s gloomy holiday season outlook is causing it to fall against many majors today.
Since opening this week at the level of 0.9023, EUR/GBP has been trending with a downside bias.
The Pound’s rebound pushed EUR/GBP to a low of 0.8866 in the middle of the week. This was the lowest level for EUR/GBP in half a year, since May.
EUR/GBP has since rebounded from that low though. At the time of writing, EUR/GBP is trending near the level of 0.8985. The pair is still well below the week’s opening levels.
Euro (EUR) Exchange Rates Lack Drive to Capitalise on Pound Recoil
While Sterling is falling back from its best levels today, the Euro has been unable to capitalise on the Pound’s weakness.
Rather, there is not much reason to buy the Euro, and the shared currency’s appeal is limited by the Eurozone’s own coronavirus concerns.
Germany and Italy continue to ramp up restrictions as the pandemic’s second wave hits their economies.
Jane Foley, Head of FX Strategy at Rabobank, said the Euro doesn’t have much solid ground to trade on as it waits for solid impetus:
‘Activity in Euro/Dollar was a little lighter yesterday and I would suggest that after the vaccine related storm of activity at the start of the week, and after the US election news, that the Euro is trying to find its feet,’
Pound (GBP) Exchange Rates Tumble on Concerns of Poor Q4 for Britain’s Economy
Today saw the publication of Britain’s Q3 Gross Domestic Product (GDP) growth rate report. The data showed that while Britain saw record high quarterly growth in Q3, it still wasn’t as big a rebound as expected.
On top of this, the data also showed that Britain’s economy slowed notably, and economists expect Britain’s economy will worsen even further going into the fourth quarter and the end of the year.
Despite the importance of the holiday period for businesses, many analysts believe the data points to another big recession at the end of the year. This left the Pound tumbling today.
Markets and economists remain hopeful that a coronavirus vaccine will help Britain’s economy to recover. Bank of England (BoE) Governor Andrew Bailey said today that the latest vaccine news was encouraging.
Still, he urged caution that the vaccine itself was quite a way away, meaning Britain’s coronavirus troubles are likely to go on until next year at least.
Euro to Pound (EUR/GBP) Exchange Rate to Round Out the Week with Eurozone Data
After being driven mostly by rival movement and coronavirus developments this week, the Euro could be influenced more by the Eurozone’s outlook tomorrow.
Friday’s European session will see the publication of the Eurozone’s Q3 Gross Domestic Product (GDP) growth rate projections.
If Eurozone growth beats expectations, it could boost hopes that the Eurozone’s economy is weathering the coronavirus pandemic. This could make the Euro more appealing.
However, if the data indicates that the Eurozone is also in for a weak Q4 or even a recession, the Euro may be in for losses that will make it harder for EUR/GBP to recover.
The Pound, on the other hand, is likely to shift its focus to Brexit in the coming sessions.
The UK and EU are expected to agree to a Brexit deal sometime this month. Speculation is rising that a deal could be presented as soon as next week.
Optimistic Brexit developments could be a big boost to the Pound outlook. This could make it even harder for the Euro to Pound exchange rate to recover.