Pound to Euro Exchange Rate Losses Deepening despite UK Government’s Stimulus
Last night, the UK government announced fresh fiscal stimulus plans, but the Pound Sterling to Euro (GBP/EUR) exchange rate has struggled to benefit. The Pound (GBP) remains jittery as domestic coronavirus concerns worsen and impact Brexit negotiations.
While not nearly as steep as last week’s 5-cent plummet, GBP/EUR is still sliding this week.
GBP/EUR opened on Monday at the level of 1.1036 and has already fallen a further cent. At the time of writing on Wednesday morning, GBP/EUR is trending near a low of 1.0912 – the worst level for the pair in 6 months since August 2019.
While the Pound slides on coronavirus and Brexit jitters, the Euro (EUR) continues to benefit slightly from safe haven demand. While not as bullish as it was last week, the Euro is still popular as a funding currency.
Pound (GBP) Exchange Rates Lack Drive as Government Admits More Action Needed
The Pound received a brief injection of support yesterday evening. UK Chancellor RIshi Sunak announced a large stimulus package for Britain’s economy to help businesses weather the coronavirus pandemic.
However, while the £330bn stimulus package was fairly well-received, some economists have criticised the stimulus as not being enough. Concerns remained about renters, the self-employed, and those laid off by downsizing businesses.
Alok Sharma, UK Business Secretary, said today:
‘The chancellor was very clear that this is a conversation he and I are having with employers and trade unions, and we’ll come forward in the coming days with further measures.’
Investors are hesitant to buy the Pound too much just yet. Instead, markets shrugged off yesterday’s news and are eagerly awaiting more from the government first.
Euro (EUR) Exchange Rates Sturdy amid Steady Eurozone Inflation and ECB Speculation
The Euro remains one of the market’s more appealing major currencies. This is despite the coronavirus spreading in Europe and the rising strength of its rival, the US Dollar (USD).
Investors are buying the Euro due to its popularity as a funding currency. However, it has found a little support elsewhere today as well.
Today’s February Eurozone inflation results fell in line with expectations, offering no surprises. As the data didn’t fall short though, it was a little relieving to investors fearing early impact from the coronavirus.
Euro investors were also slightly reassured by comments from the European Central Bank (ECB), saying it was not out of ammo to tackle the pandemic.
Responding to comments recently made by policymaker Robert Holzmann, the ECB asserted it was prepared to take more action as appropriate and needed.
Pound to Euro (GBP/EUR) Exchange Rate Awaits Further Action from Officials
Most of this week’s notable UK and Eurozone data has already been publshed. It has largely been brushed over by markets, proving the extent of which coronavirus jitters are dominating sentiment.
As a result, it’s perhaps unsurprising that the coronavirus will continue to dominate Pound and Euro movement in the coming sessions.
The UK Treasury’s indication that it will continue to ramp up stimulus is the focus for Sterling. Investors are closely watching for the fiscal policy the government could take. If it impresses investors, the Pound is more likely to mount a recovery.
If stimulus fails to impress investors or Brexit jitters worsen though, the Pound will remain pressured.
The Euro, on the other hand, is likely to remain fairly appealing on safe haven demand. However, if the Eurozone outlook takes a sudden downside turn or the US Dollar (USD) sees a stronger surge in demand, the Euro could be hit.
Pound to Euro (GBP/EUR) exchange rate investors will also be closely watching for any policy signals from the European Central Bank (ECB).