Pound to Euro Exchange Rate Edges Away from Lows Following Tuesday Tumble
The Pound (GBP) has seen weaker performance this week so far as Bank of England (BoE) and Brexit uncertainties rise, but the Pound Sterling to Euro (GBP/EUR) exchange rate is now edging away from yesterday’s lows.
After opening this week at the level of 1.1856, GBP/EUR has trended with a downside bias. GBP/EUR touched on this week’s low of 1.1796 yesterday, but the pair has since stabilised slightly and is currently trending closer to the level of 1.1825.
Despite this week’s modest losses, GBP/EUR still sustains most of last week’s impressive gains.
Investors are now looking ahead to key data and central bank news, after today’s Eurozone data did little to inspire Euro (EUR) movement.
Pound (GBP) Exchange Rates Steadies Ahead of Bank of England (BoE) Policy Decision
The Pound (GBP) has been under pressure this week, as the possibility of a January interest rate cut from the Bank of England (BoE) remains a possibility tomorrow.
On top of lingering Bank of England interest rate cut speculation, the Pound has been weighed by returning concerns over the future of Britain’s relationship with the EU.
Britain will be formally leaving the EU at the end of the week – Friday is Brexit day. It will set off a 2020 of UK-EU negotiations, in a transition period that lasts until the end of the year.
Analysts are concerned that negotiators will not be able to reach agreements in key areas which could lead to a harder Brexit outcome at the end of the year.
For now though, market anticipation for tomorrow’s major Bank of England policy decision is keeping the Pound from tumbling any lower after yesterday’s drop.
Euro (EUR) Exchange Rates Lack Drive despite Stronger Consumer Confidence
Yesterday saw the Euro strengthen due to weakness in rivals. Investors sold currencies correlated with risk amid China’s coronavirus outbreak and steadied on currencies that had surged like the safe haven Japanese Yen (JPY), which benefitted the Euro slightly.
The primary cause of yesterday’s drops was investors selling the Pound though. Overall, the Euro is still lacking in drive.
Investors have been hesitant to buy the Euro too much, as recent Eurozone data has been too mixed to make investors confident in a strong Eurozone economic rebound.
GfK’s German consumer confidence unexpectedly rose to 9.9 for February in today’s report. According to Rolf Bürkl, Consumer Expert at GfK:
‘The positive start for the consumer climate in 2020 confirms our assessment that private consumption will continue to be an important pillar of the German economy this year. For the year as a whole, GfK forecasts real growth in private consumer spending in Germany of one percent.’
As a result of lingering uncertainties though, this morning’s Eurozone data ultimately has had little impact on the Euro.
Pound to Euro (GBP/EUR) Exchange Rate Awaits Bank of England (BoE) Policy Decision
As today’s Eurozone data has had limited impact on the Euro and global coronavirus concerns are calming slightly for now, the Pound to Euro (GBP/EUR) exchange rate is awaiting the next big developments.
The tail end of the week will be highly influential for GBP/EUR. Tomorrow’s Bank of England (BoE) policy decision, for example, will be one of this month’s most influential events for the Pound.
Markets are still highly uncertain over whether the BoE will take a more negative tone on recent UK data, or if the data was enough to make the bank more optimistic about a UK economic rebound.
The BoE could still cut UK interest rates tomorrow. If rates are cut, the Pound could slump in surprise. A more optimistic tone from the BoE would help GBP/EUR to sustain a recovery instead though.
Upcoming Eurozone data could also prove influential, such as tomorrow’s German unemployment and inflation rate stats.
Friday’s key Eurozone data, as well as the formal Brexit date, could also cause some late-week movement in the Pound to Euro (GBP/EUR) exchange rate.