Euro Pound Sterling (EUR/GBP) Exchange Rate Jumps as GBP Investors Wary of Coronavirus
The Euro Pound Sterling (EUR/GBP) exchange rate rallied over 1% this morning, leaving the pairing trading at around £0.9274.
Sterling suffered losses on Monday as investors headed back towards the US Dollar once again. This left the British currency heading back towards last week’s 35-year lows against USD.
As fresh round of coronavirus pandemic hit GBP as investors grew wary of the government’s approach of dealing with the virus. The country has seen a more staggered approach to the disruption to economic and everyday life.
Although, some analysts have praised the country’s response to the crisis after the Bank of England (BoE) cut rates to a record low and ramped up quantitative easing. Added to this, Chancellor Rishi Sunak announced significant fiscal stimulus.
Commenting on this, ING analyts wrote in a research note:
‘The broken financial environment means that GBP is not able to respond to the proactive fiscal support undertaken by UK policy makers.’
Bundesbank: German Recession is Inevitable
The single currency was able to edge higher against a weaker Pound on Monday. Traders began to flock back to the safe-haven US Dollar (USD).
Coronavirus remained in focus again, with general market sentiment dampened after the US Senate failed to approve a $1 trillion-plus funding package.
While the political deadlock weighed on markets, the Euro was able to edge higher.
Meanwhile, in its monthly report, Germany’s Bundesbank said a deep recession in the bloc’s largest economy is now inevitable.
Although, the bank did note that German public finances were well positioned to cope with this.
With the economy already on the edge of a recession before the coronavirus dominated headlines, the virus has hit the domestic market which was earlier able to prop up the economy amid global trade tensions.
In its report, the Bundesbank noted:
‘The slide into a pronounced recession cannot be prevented.
‘German public finances are well positioned for this.’
Euro Pound Outlook: Will Weak German PMIs Send EUR Lower?
The Euro (EUR) could suffer losses against the Pound (GBP) following the release of Germany’s flash PMI data.
If March’s flash services and manufacturing PMIs plummets further than expected, the single currency will slump.
Meanwhile, Sterling could slide against a handful of currencies following the release of British flash PMI surveys.
If the highly-anticipated flash services PMI plummet into contraction while German data disappoints, it could leave the Euro Pound (EUR/GBP) muted.
