EUR/GBP Exchange Rate Drops as Inflation and COVID Cases Rise
The Euro to Pound (EUR/GBP) exchange rate edged slightly lower as European markets opened after the weekend.
This change comes amidst declining risk appetite and rising concerns over the renewed spread of COVID-19.
Euro (EUR) Falls as Risk-Off Mood Accompanies COVID Spike
Despite new cases largely confined to the UK, Australia and Japan, growing concerns surrounding the increase in coronavirus cases have inspired a dip in risk appetite, pushing investors towards the US Dollar and away from the Euro.
Germany took decisive action on Friday as Chancellor Angela Merkel announced intentions to designate Britain as a ‘country of concern’, with the aim of banning British travellers from entering the European Union. Potentially damaging to the tourist trade, her cautionary stance likely encouraged bearishness amongst Euro traders.
Executive Board Member of the European Central Bank (ECB) Fabio Panetta also adopted a critical tone in his speech this morning, warning of the ‘liquidity trap’ posed by weak inflation and nominal interest rates.
GBP Strengthens in Spite of Brexit Woes and Health Secretary Scandal
The Pound (GBP) has gained against a weaker Euro despite renewed tensions between the EU and UK over Brexit. Recent news suggests the Irish Prime Minister’s efforts to accommodate unionists’ oppositional views may further hinder progress over the Northern Ireland protocol.
In other news, British Health Secretary Matt Hancock was forced to resign following the public exposure of his affair with aide Gina Coladangelo. Public opinion regarding Mr. Hancock had already been divided given his appointment of friends to well-paying cabinet positions, and continues to plummet as Hancock faces fresh accusations of breaching government security protocol.
Rising Covid cases in Britain are also causing concern as national and international travel pose a threat to the country’s pandemic recovery programme. Infections are rising exponentially against falling numbers in the USA and Europe.
In spite of these threats Sterling has stabilised, supported by continuing hopes of an end to all UK social restrictions on July 19th.
EUR/GBP Forecast: European Data to Boost Euro Prospects?
Turning to the week ahead, Tuesday poses the first likely catalyst for meaningful movement in the EUR/GBP currency pair, as European economic sentiment and German inflation rate publications are scheduled for release.
The gauge of sentiment in the Eurozone is expected to show an improvement in confidence, with forecasts for a reading of 116.5, up from May’s reading of 114.5.
Such a result could lend the Euro support.
Germany’s annual inflation reading is expected to come in at 2.3%, down slightly from the previous year-on-year figure of 2.5%.
