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Pound Sterling to Euro Exchange Rate Avoids Losses despite Eurozone’s Coronabonds Hopes

Pound to Euro Exchange Rate Edging Higher on Hopes UK Will Weather Coronavirus 

Despite rising hopes that EU nations could soon agree to EU-wide fiscal stimulus, the Pound Sterling to Euro (GBP/EUR) exchange rate has been holding its ground today so far. The Pound (GBP) has been rebounding slightly as Britain’s outlook cools. 

The Pound’s recent recovery rebound still had legs in it last week. This helped GBP/EUR to regain some ground and climb from the level of 1.1170 to 1.1357 throughout the week. 

This week’s movement has been a little more mixed in comparison so far. GBP/EUR briefly dipped when markets opened this morning but has since recovered. The pair is currently trending near the level of 1.1384. 

GBP/EUR is trending just below last Friday’s 3-week-best level of 1.1437. 

Sterling’s rally may finally be running out of steam, but it has avoided fresh losses this morning after a brief shock over UK Prime Minister Boris Johnson proved to be short-lived. 

Pound (GBP) Exchange Rates Steadies after Dip on Boris Johnson’s Hospitalisation 

UK Prime Minister Boris Johnson was admitted to hospital today to be tested after showing more coronavirus symptoms. 

As Johnson had already been confirmed positive for coronavirus, the latest development caused some slight market panic over his health. 

However, the Pound’s dip was short-lived. UK officials said that Johnson would return to office soon, reassuring markets that the hospital visit would go smoothly. Sterling has been climbing again since then. 

According to Viraj Patel, Global FX and Macro Strategist at Arkera: 

‘Markets were initially quick to jump to the worst possible conclusion and assume that the PM’s illness would create a degree of dysfunctioning within the UK government, which was not the case given that there were measures in place to deal with such a scenario, 

What we’re seeing now is the Pound retracing this unusual move lower as details emerge that we’re far from the worst-case scenario of the UK government being plunged into disarray. 

Euro (EUR) Exchange Rate Losses Limited on Coronabonds Hopes despite Dire Outlook 

Sterling was able to hold its ground against the Euro a little more easily, thanks to market concerns over the Eurozone’s outlook. 

As Eurozone investor sentiment hit record lows due to the coronavirus pandemic, the Euro came under further pressure. 

However, the shared currency’s weakness was limited. Investors are becoming more hopeful that EU leaders will reach some sort of deal over EU-wide fiscal stimulus. ‘Coronabonds’ hopes are keeping the Euro from falling much today. 

According to Analysts at ING: 

‘Now that the European Central Bank seems to have peripheral European debt markets under control, the focus shifts to the collective political response. Key here will be Tuesday’s Eurogroup meeting. The FT today reports that Germany’s resistance to Coronabonds may be starting to soften, although any agreement on this issue tomorrow looks premature/would be a major surprise.’ 

Pound to Euro (GBP/EUR) Exchange Rate Focused on EU’s Coronabonds Discussions 

The market’s appetite for the Pound could continue to recover and steady when UK Prime Minister Boris Johnson returns from hospital. However, for now the biggest focus for the Pound to Euro exchange rate will be EU fiscal policy. 

So-called ‘coronabonds’, proposed by many EU nations and European Central Bank (ECB) President Christine Lagarde, will be discussed at a Eurogroup meeting tomorrow. 

While a major breakthrough is still seen as unlikely, the Euro could finally see some more support if there are any notable positive developments in the EU’s fiscal policy plans. 

The EU is still expected to ramp up economic support against the coronavirus pandemic. If the Eurozone outlook improves, the Euro will be more likely to see steady movement. 

Sterling, on the other hand, will remain a little riskier in comparison. The Pound to Euro (GBP/EUR) exchange rate will be able to advance more easily if Britain’s coronavirus outlook shows any solid signs of recovery.