EUR/GBP Exchange Rate Rises as Growing Hope for Further Stimulus Buoys Single Currency
The Euro to Pound (EUR/GBP) exchange rose by 0.5% today, with the pairing currently trading around £0.89.
The Euro (EUR) has edged higher against a weaker Sterling today, despite today’s release of Italy’s industrial output falling by a whopping -42.5%. in April.
Paolo Pizzoli, the senior economist at ING for Italy and Greece, commented on the data:
‘Looking forward, we anticipate a gradual improvement in economic conditions starting from May. This will not be able to prevent 2Q20 GDP data from falling at a quicker pace than in 1Q20. We anticipate a decent rebound in GDP over 3Q, but the expected profile is very unlikely to look like a ‘V’. For the time being, we tentatively confirm our base case 2020 GDP growth forecast for Italy at -9.8%, with downside risks.’
However, the Euro (EUR) has benefited from dampening risk appetite, with the safe-haven single currency gaining as a result. This follows yesterday’s gloomy forecasts for the US economy – the largest economy in the world – by the Federal Reserve.
Meanwhile, hopes are growing for the Eurozone’s economy after the European Central Bank (ECB) continues to push ahead with stimulus measures. As a result, we could see the EUR/GBP exchange rate continue to edge higher as the ECB draws up a scheme to mop of Covid-19 debt.
Pound (GBP) Falls as British Economic Outlook Darkens Ahead of Friday’s GDP Report
The Pound (GBP) struggled today as concerns continue to grow over the health of the British economy. Instead, many investors are looking ahead to tomorrow, with the UK’s latest GDP figure for April expected to plummet by -18.4%.
Yesterday also saw a sobering report from the Organisation for Economic Co-operation and Development (OECD). The OECD forecasts that the UK economy could be hit the hardest by Covid-19, with an expected slump of 11.5% in 20202.
Shadow chancellor Anneliese Dodds commented on the OECD’s report:
‘[The] evidence from the OECD is deeply worrying, showing the UK was particularly exposed when the coronavirus crisis hit.’
‘The government’s failure to get on top of the health crisis, delay going into lockdown and chaotic mismanagement of the exit from lockdown are making the economic impact of this crisis worse.’
Meanwhile, Sterling traders are focusing on the UK’s coronavirus situation. Any further signs that Downing Street could be pressurised to abandon the 2-meter rule could lend the GBP some support.
EUR/GBP Outlook: Could Weak UK Data Send Sterling Plummeting?
Euro (EUR) investors will be looking ahead to tomorrow’s release of April’s Eurozone industrial production report. However, if this falls to -20% as forecast, then we could see the single currency suffer.
Single currency investors will also be focusing on the ECB’s next moves to aid the Eurozone’s economy. Any hints of further stimulus measures would prove EUR-positive.
GBP traders will be awaiting tomorrows’ release of the UK’s industrial production and GDP report for April. However, with data expected to be weak the EUR/GBP exchange rate could continue to head higher.
