GBP/EUR Exchange Rate Edges Higher as Eurozone Economic Woes Continue
The Pound to Euro (GBP/EUR) exchange rate rose by 0.4% today, with the pairing currently trading around €1.135.
The Euro (EUR) continues to struggle as markets are becoming restless over the Eurozone’s polarisation as the bloc struggles to form a united approach to the financial damage caused by the coronavirus pandemic.
Tensions within the Eurozone flared up after 12 Italian politicians wrote an open letter in the German newspaper, Frankfurter Allgemeine Zeitung, urging Germany to back the bloc’s collective response to the economic damage caused by the virus:
‘Dear German friends, with the coronavirus the shared history of the Western world has once again taken centre stage.’
‘Today the EU does not have the means to respond to the crisis in a united front. If it does not prove that it exists, it will cease to exist.’
Consequently, fears of growing divisions within the European Union is adding further downwards pressure on the EUR/GBP exchange rate this morning.
Pound (GBP) Rises Despite Risks to UK Economy
The Pound (GBP) has continued its gains for a seventh day in a row today despite ongoing fears over the negative impact the coronavirus will have on the British economy.
Sterling benefited from rising hopes that UK-EU trade negotiations could be delayed, allowing for more time for both powers to secure a trade agreement either next year or beyond.
As a result, this has bolstered a sense of certainty for many British firms who were concerned that the UK could crash out the EU.
Centre for Economics and Business Research (CEBR) predicted a 15% drop in the UK’s economy for the second quarter, Britain’s economic future looks increasingly dim. Pound investors are remaining cautious Covid-19 developments are set to continue in the months ahead.
Robert Wood, UK Economist at BofA Global Research, commented on a recent propriety consumer survey:
‘If those respondents have average productivity then simplistically our survey suggests 34% lower GDP every day the shock continues, or c11% lower quarterly GDP for every month it continues. These calculations are simplistic but suggest a very large fall in GDP.’
GBP/EUR Forecast: Could the Euro Begin to Rise as Italy’s Covid-19 Cases Slow?
Sterling investors will be awaiting tomorrow’s release of the final UK Markit Services PMI. However, if this sinks any deeper into contraction territory, we could see the GBP/EUR exchange rate begin to shed some of its gains.
The Euro (EUR) could recoup some of its losses this week as yesterday saw Italy’s coronavirus fatalities drop to their lowest in three weeks. The drop in cases has provided a glimmer of hope to Euro investors as Europe’s most largely affected country shows signs of recovery.