Pound to Euro Exchange Rate Unable to Benefit from This Week’s UK Data
Major UK data published this week has done little for the Pound Sterling to Euro (GBP/EUR) exchange rate’s strength. In fact, Eurozone data and news continues to support the Euro (EUR) while investors hope for developments in the EU Recovery Fund.
After opening this week at the level of 1.1175, GBP/EUR immediately plummeted. Sterling (GBP) weakness and Euro appeal made a double-threat. The pair shed all of the previous week’s gains.
While GBP/EUR has rebounded slightly from the mid-week fortnight low of 1.0978, its recovery has been limited. At the time of writing on Friday, GBP/EUR has only been able to recover to around the level of 1.1021.
While some more notable UK data is due next week, market focus is turning to the EU for now. EU officials are meeting over the EU Recovery Fund.
Pound (GBP) Exchange Rates Fail to Find Support
This week was a key week for UK data, with more solid information around how Britain’s economy is weathering the coronavirus pandemic.
However, most of the data was either disappointing or lacked in the hopeful stats needed to boost Britain’s outlook.
The Pound started the week off tumbling as domestic growth fell well short of expectations. It has only been kept low as other stats have been unable to offer the British currency much support.
Britain’s coronavirus and Brexit outlooks continue to cast gloom over the currency as well. The UK government’s mixed responses to various issues are causing uncertainty. According to Analysts at ING:
‘The mixed messages from the UK authorities on return to work policy (prime minister Boris Johnson saying workers should come back to the office, while chief scientific adviser Sir Patrick Vallance in contrast suggesting people should continue working from home) doesn’t make GBP prospects more appealing either.’
Euro (EUR) Exchange Rates Sturdy Ahead of EU Summit after ECB Leaves Policy Frozen
Yesterday saw the European Central Bank (ECB) hold its July policy decision. There were no shifts in monetary policy, nor were there any surprises in the bank’s tone or outlook.
The Eurozone’s outlook remains comparatively positive overall. Eurozone data has been showing signs of improvement and markets have been happy with the EU’s handling of the coronavirus pandemic.
While the ECB did warn about the potential impact of a coronavirus ‘second wave’, the bank was overall in wait and see mode.
Eurozone markets are eagerly awaiting progress on a potential EU Recovery Fund. An EU Summit, taking place this weekend, is expected to show progress in negotiations towards the fund.
Pound to Euro (GBP/EUR) Exchange Rate Awaits EU Summit Developments
Investors may be hesitant to make big moves on the Euro today, unless there are surprising developments in an upcoming EU Summit.
Leaders from EU nations will be joining the summit. For markets, perhaps the biggest attraction is that there may be progress in negotiations over the EU Recovery Fund.
If EU leaders show progress or optimism over a plan to help the EU to recover from the coronavirus pandemic, the Euro’s appeal will only strengthen.
German Chancellor Angela Merkel has said it is uncertain whether a compromise will be made this time. However, analysts widely expect there to only be slight progress.
According to Analysts at ING:
‘our base case is for some progress towards a compromise, but no final agreement as more time for negotiations will still be required.’
As for the Pound, investors are unlikely to have much reason to buy the British currency. Some more key UK data is due next week, but Pound to Euro (GBP/EUR) exchange rate movement could remain weak for to Britain’s gloomy outlook.
