Euro to Pound Exchange Rate Struggles to Rebound from Last Week’s Losses
Hopes that the UK government is taking a firmer stance against the coronavirus pandemic are keeping the Euro to Pound Sterling (EUR/GBP) exchange rate pressured. The Euro (EUR) is struggling to advance despite strong Eurozone data.
Last week saw EUR/GBP plummet, as the Pound (GBP) capitalised on shifts in market sentiment. EUR/GBP opened the week at the level of 0.9109 and shed over a penny throughout the week.
EUR/GBP ultimately closed last week at the level of 0.9000. This morning, EUR/GBP dipped even lower, touching on a low of 0.8972, the pair’s lowest level in half a month.
At the time of writing, EUR/GBP is trending closer to the week’s opening levels again. The Euro outlook is still fairly strong overall, so its potential for further losses may be limited.
Euro (EUR) Exchange Rates Continue to Find Support as Eurozone PMIs Beat Forecasts
While last week saw the Euro tumble against the Pound, the Euro’s outlook remains fairly strong overall.
The shared currency is being supported by strong Eurozone data, coordinated action on the coronavirus pandemic from EU officials, and weakness in rival currencies.
The global market’s worsening coronavirus outlook did hit the Euro last week, while the Pound outlook improved. Still, the Euro remains more appealing than most major currencies and the latest Eurozone data continues to show more resilience than expected.
July’s final Eurozone PMIs were published this morning and beat expectations in most major prints.
As the Pound’s strength is lingering though, the Euro is struggling to rebound for now.
Pound (GBP) Exchange Rates Hold Ground for Now as UK Coronavirus Outlook Improves
The Pound surged across the board last week. Investors piled in the British currency against many major rivals, despite a lack of particularly impressive UK developments or data.
Analysts noted that the Pound’s gains were largely due to major US Dollar (USD) weakness. It came as investors reassessed their impressions of the US and UK coronavirus outlooks.
While the US coronavirus outlook continues to worsen, the UK is being perceived as handling the coronavirus pandemic comparatively better than the US. The UK handling is also being seen as improving, according to Thu Lan Nguyen at Commerzbank:
‘The trauma of the first phase of the virus, in which the British government introduced a lockdown late compared to most other European countries, which is why the UK temporarily became a corona hotspot, seems to be deep-seated,
However, the fact that the British government appears to be capable of learning is now being rewarded with a strong Pound,’
Today’s UK PMI data fell short of expectations, but it was not enough to dampen the market’s current appetited for Sterling.
Euro to Pound (EUR/GBP) Exchange Rate Awaits PMIs, Bank of England (BoE)
The Euro to Pound exchange rate could rebound in the coming sessions, depending on how upcoming data and a key central bank decision unfold.
July’s final services and composite PMIs from Markit will be published on Wednesday. If the Eurozone stats continue to beat forecasts, the Euro is likely to keep seeing support.
However, the week’s biggest news will be Thursday’s Bank of England (BoE) policy decision.
The BoE is not expected to make any surprising announcements on UK monetary policy. However the bank’s tone on the coronavirus pandemic as well as the possibility of any signals on the issue of negative interest rates will be closely watched.
If the BoE continues to refuse to indicate that negative interest rates are possible, the Pound could give up some of its recent strength.
The Pound to Euro (GBP/EUR) exchange rate could climb instead if the bank is more hawkish than expected.