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Pound Sterling to Euro Exchange Rate Struggling to Sustain Gains Ahead of Bank of England (BoE)

Pound to Euro Exchange Rate Volatile amid Coronavirus Uncertainty 

Both the Pound (GBP) and the Euro (EUR) have been a little stronger amid US Dollar (USD) weakness, so the Pound Sterling to Euro (GBP/EUR) exchange rate’s movement has been jittery. Investors are hesitant to buy Sterling too much ahead of possible stimulus developments. 

GBP/EUR has seen mixed movement since opening this week at the level of 1.0847. The pair dipped earlier in the week and rose yesterday, but ultimately continues to trend close enough to the week’s opening levels at the time of writing on Thursday. 

Still, GBP/EUR has been able to hold above last week’s decade-low of 1.0533 due to the Pound’s slightly stronger appeal.  

Overall though, the Pound currently lacks the drive to advance much as investors await Bank of England and UK Treasury stimulus developments. Meanwhile, the Euro is holding its ground decently well due to improving stimulus efforts in the Eurozone. 

Pound (GBP) Exchange Rate Investors Anticipating Bank of England and UK Chancellor 

The Pound has seen slightly stronger performance this week so far. However, this has been more due to weakness in the US Dollar (USD) than any solid support for the British currency. 

Instead, Pound investors are eagerly anticipating more support for Britain’s economy to weather the coronavirus pandemic. 

The Pound’s movement today has been fairly limited so far. Investors are hesitant to move much on the British currency ahead of the Bank of England’s (BoE) upcoming March policy decision. 

However, expectations for the decision are fairly muted. According to Analysts from ING: 

‘Following the emergency rate cut and announcement of quantitative easing (£200bn), today’s Bank of England meeting should provide less excitement. The central bank may signal it is ready to do more should it be necessary but is unlikely to act today.’ 

On top of this, investors hope for a fresh wave of fiscal stimulus from the UK Treasury to be unveiled soon. 

Euro (EUR) Exchange Rates Holding Ground on Rising EU Stimulus Hopes 

The Euro has benefitted from market safe haven demand lately, especially when its rival the US Dollar (USD) is weaker. 

Amid the US Dollar’s weakness in recent sessions, the Euro has been holding its ground a little better. This is limiting the Euro’s losses from this week’s safe haven selloff. 

On top of US Dollar weakness though, the Euro is also benefitting from reaction to increased fiscal stimulus efforts from major EU nations. 

While there is reluctancy from some EU nations, European Central Bank (ECB) President Christine Lagarde and many notable EU nations have called for ‘coronabonds’ to help the Eurozone to weather the coronavirus pandemic. 

According to Lee Hardman, Currency Analyst at MUFG: 

‘The Euro appears to be gaining support from building evidence of a shift towards a more co-ordinated and unified response by European policymakers to combat the negative COVID-19 shock to the Eurozone economy. 

France, Italy, Spain and six other Eurozone governments have called for the issuance of joint European debt to help finance economic support measures. They have put forward the case for so-called ‘corona bonds’ ahead of today’s scheduled video conference between EU Leaders.’ 

Pound to Euro (GBP/EUR) Exchange Rate Investors Await Further Stimulus News 

The Pound to Euro exchange rate lacks the drive to advance much, but unless the Euro weakens again it may struggle to gain further. 

Pound investors are awaiting more stimulus news, but analysts predict the Bank of England’s (BoE) policy decision may not have much in the way of big developments. 

Analysts at ING said: 

‘The direct impact from the BoE meeting on Sterling should be fairly limited.’ 

Unless the bank surprises investors, the Pound’s movement may remain limited until the UK government ramps up its fiscal stimulus plans. UK Chancellor Rishi Sunak is expected to introduce measures to protect self-employed workers soon. 

The Euro, on the other hand, could remain fairly appealing. If EU fiscal stimulus improves or safe haven demand rises while the US Dollar (USD) remains pressured, the Euro could advance. The Pound to Euro (GBP/EUR) has the potential to fall again.