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Fortnight Lows for Euro to Pound Exchange Rate Ahead of UK Summer Statement

Euro to Pound Exchange Rate Steadies Lower Ahead of UK Chancellor’s Statements 

Fears of a second round of coronavirus infections continue to rise, and this is weighing on the Euro to Pound Sterling (EUR/GBP) exchange rate. Still, the Euro (EUR) outlook remains stronger than the Pound (GBP) outlook so these losses may prove temporary. 

The Pound has been recovering ground since last week, when EUR/GBP tumbled from the level of 0.9092 to close the week at around 0.9010. 

However, at the beginning of last week, EUR/GBP touched on a high of 0.9166. This was the best level for the pair in a quarter, and EUR/GBP is still relatively close to these highs overall. 

This week so far, EUR/GBP has fallen further. EUR/GBP is currently floundering near lows of 0.8971 – the worst level for the pair in about a fortnight. 

Euro (EUR) Exchange Rates Steadying Lower as Market Await EU Fund Developments 

Concerns that the coronavirus recovery won’t be as much of a rebound as previously hoped have been weighing on the Euro over the past week. 

As signs of a ‘second wave’ rise amid surges of infections in the US and some parts of Australia, investors have been less optimistic about a global recovery. 

As the Euro has one of the currencies that charged highest on recovery hopes, it has slipped a little. Yesterday saw the European Commission (EC) cut its Eurozone growth forecasts too. 

The EC said that the coronavirus pandemic’s impact on the economy had been even worse than previously expected. This caused some Euro weakness yesterday. 

Overall though, investors remain cautiously optimistic on the Eurozone outlook. Markets continue to anxiously anticipate more on the EU’s recovery fund plans, and Eurozone data remains solid. 

Pound (GBP) Exchange Rates Edging Higher on Brexit Speculation 

Since last week, fresh speculation that UK-EU Brexit negotiations could see productive developments this month have been supporting Sterling. 

Some analysts predicted that if there are any breakthroughs, they could well happen this month. This has caused bets of a Brexit compromise to rise slightly, which is helping support Sterling. 

Sterling is also steadying slightly as investors await news from today’s upcoming UK budget news. 

UK Chancellor Rishi Sunak will deliver a supplementary Summer Statement later today. Analysts at Brown Brothers Harriman said businesses and markets are hoping for something aggressive: 

‘Prime Minister Johnson’s so-called New Deal for infrastructure spending was deemed insufficient and so UK business interests are urging Sunak to be more aggressive,’ 

Euro to Pound (EUR/GBP) Exchange Rate to be Driven by Domestic Politics 

Some fairly notable Eurozone data, including German trade stats, will be published in the second half of this week. 

However, the Euro to Pound exchange rate is more likely to focus on political developments around the coronavirus and Brexit issues. 

Euro traders await the upcoming EU Summit. According to FXStreet Analyst Yohay Elam: 

‘The focus shifts to the EU Summit – the first post-pandemic face-to-face encounter – with the proposed EU Fund topping the agenda.  

 

Investors expect a compromise, but further feet-dragging may weigh on the common currency.’ 

As for the Pound, investors of course await today’s UK Summer Statement. Any plans on how to help Britain’s economy rebound from the coronavirus pandemic could boost Sterling if they impress. 

Euro to Pound (EUR/GBP) exchange rate investors will also keep an eye on UK-EU Brexit negotiations.