Pound to Euro Exchange Rate Looks to Sustain Gains despite ECB Optimism
Update 16:54 BST 05/06/2020:
The Euro’s (EUR) strong support from this week’s European Central Bank (ECB) news was short-lived. On Friday the Pound to Euro (GBP/EUR) exchange rate recovered much of the previous day’s losses.
While Brexit uncertainty is worsening and Britain’s coronavirus outlook is mixed, the Pound (GBP) has been resilient.
As a result, despite the week’s positive ECB news, the Euro ultimately slipped today due to strength in rivals.
The Pound is benefitting from hopes that the Bank of England (BoE) will avoid negative interest rates. Meanwhile, the US Dollar (USD) climbed after stronger than expected US data. These stronger rivals weakened the Euro and made it easier for GBP/EUR to advance.
(Originally published 10:46 BST 05/06/2020)
Pound to Euro Exchange Rate Climbs despite Dire UK and Brexit Outlooks
The Pound Sterling to Euro (GBP/EUR) exchange rate is once again attempting to advance today, after yesterday’s European Central Bank (ECB) news knocked the pair. Sterling (GBP) is advancing despite dire UK data and Brexit fears.
After opening this week at the level of 1.1120, GBP/EUR attempted to mount a recovery of over a cent. However, mounting poor news against the Pound as well as some impressive European Central Bank (ECB) news knocked the pair back yesterday.
GBP/EUR is trying to climb again today, up around a third of a cent. This is despite a lack of supportive news for the Pound. It is due partially to pullback in the Euro (EUR).
However, with markets increasingly anxious that the UK government is running out of time to extend Brexit negotiations, there may be more weakness ahead for Sterling.
Pound (GBP) Exchange Rates Benefit from Fresh Risk-Sentiment
The Pound has been throttled by building coronavirus and Brexit concerns in recent weeks. As a result, it has been trending near multi-month-lows against many major currency rivals.
This morning’s UK data has only worsened market concerns over the health of Britain’s economy amid the coronavirus pandemic. GfK’s May consumer confidence results fell to an even lower than expected –36, following the previous figure of –33.
Even bigger a concern for GBP investors is mounting fear that there has been little progress on Brexit talks over the past few months.
If the UK government refuses to delay the Brexit transition period before the end of June, then it will not be able to be delayed and could lead to a cliff-edge scenario at the end of 2020.
Despite these factors, the Pound is benefitting a little from the market’s risk-on movement at the time of writing. Hopes for an economic turnaround from the pandemic are leading investors to buy some currencies seen as riskier.
Euro (EUR) Exchange Rates See Slight Pullback from Yesterday’s ECB Boost
Yesterday, the European Central Bank (ECB) announced an impressive expansion to its stimulus programme.
The Euro (EUR) had already been performing fairly strongly against major rivals like the Pound and US Dollar (USD) in recent weeks, but yesterday’s news saw it bolstered to multi-month-highs.
The ECB announced that it was raising its huge emergency bond purchasing scheme to 1.35trillion Euros. The programme would also be extended to mid-2021.
It bolstered market optimism that Europe would play a significant part in helping the global economy to rebound. While such dovish measures would typically be Euro-negative, the reassuring news helped the shared currency instead.
The Euro is pulling back slightly from yesterday’s highs, but it may have further room to advance if its rivals the Pound and US Dollar (USD) remain weak.
Pound to Euro (GBP/EUR) Exchange Rate Investors Hopes for Brexit are Running Low
As some parts of the Britain and Europe’s economies start to reopen from the coronavirus pandemic, hopes are rising for some kind of economic rebound from months of dire performance.
However, this optimism for Britain is limited, as markets are increasingly turning their attention back to the current state of Brexit negotiations.
With little perceived progress in Brexit talks over the past few months and Britain’s government running out of time to extend the transition process, markets are once again fearing a cliff-edge Brexit.
If no UK-EU deal is made before the Brexit transition period ends at the end of 2020, Britain will lose all its connections to the EU in a cliff-edge scenario. This worst-case scenario is once again being seen as increasingly likely.
Pound investors will be closely watching for any Brexit developments at all over the coming weeks. Any sign that the UK government may agree to extend the transition period into 2021 could lead to a sharp boost in the Pound.
As for the Euro, it may remain appealing against its weak rivals. While the Pound to Euro (GBP/EUR) exchange rate is edging higher today, the pair’s outlook remains fairly bearish overall.