Pound to Euro Exchange Rate Struggles to Hold Best Levels amid Euro Resilience
Following last week’s market rebound, the Pound Sterling to Euro (GBP/EUR) exchange rate’s movement has been more mixed this week so far. Even as the pair starts April off near multi-week-highs, the Pound’s potential for further gains is limited.
Following last week’s impressive three cent jump, GBP/EUR opened this week at the level of 1.1171.
GBP/EUR has since continued to trend with an upside bias, touching on a high of 1.1576. This was the best level for the pair in over three weeks since the tenth of March.
At the time of writing on Wednesday, GBP/EUR is trending near the level of 1.1244. The pair is solidly above the week’s opening levels but is struggling to hold its best levels. Some of the market’s fresh safe haven demand is supporting the Euro (EUR).
For now, markets continue to anticipate developments with the coronavirus pandemic, as well as key PMI data due in the coming sessions.
Pound (GBP) Exchange Rates Slip after Jumping on Quarter-End Positioning
Demand for the Pound (GBP) has been a little stronger since last week. However, rather than any UK news boosting the British currency’s appeal, this has been more due to market sentiment.
With last week’s reversal of US Dollar (USD) strength running out of steam, markets are still anxious. This is preventing further calm and limiting demand for currencies perceived as more risky like the Pound.
The Pound has been a little stronger this week so far due to market positioning at the end of the first quarter. Jane Foley, Senior FX Strategist at Rabobank, said yesterday:
‘I’ve spoken to our traders this morning and they said that trading in Sterling today was very much dominated by positioning in the quarter end,’
Euro (EUR) Exchange Rates See Slight Safe Haven Demand amid Mixed Manufacturing Data
Demand for the Euro has been mixed this week.
It has been unable to benefit from market safe haven demand as much as more traditional safe havens like its rival the US Dollar (USD) or the Japanese Yen (JPY). However, it has recovered slightly against the Pound today.
Investors are hesitant to sell the relatively safe Euro too much, even amid the Eurozone’s dire outlook in regards to the coronavirus.
EU nations are still seeing splits over the possibility of EU-wise fiscal stimulus to protect against the damage of the pandemic. On top of this, Eurozone data is increasingly showing that the bloc is being hugely hit by the crisis.
Markit’s final March manufacturing PMIs for the Eurozone were published today. While the data was a little stronger than expected in France, it was weaker in Germany and the bloc overall. According to Markit’s Chief Business Economist, Chris Williamson:
‘Even the slide in the PMI to a seven-and-a-half year low masks the severity of the slump in manufacturing as it includes a measure of supply chain delays, which boosted the index. Supply delays are normally seen as a sign of rising demand, but at the moment near-record delays are an indication of global supply chains being decimated by factory closures around the world.’
Pound to Euro (GBP/EUR) Exchange Rate Could Tumble if Sterling Lacks Fresh Support
The Pound has been able to sustain a recovery from its worst levels in the past week. However, there is doubt that the Pound will see much further strength.
Expectations for a deep UK recession are worsening. This week’s UK PMI data is expected to confirm there was a significant plunge in activity in March.
As a result, the Pound’s potential for further gains depends largely on overall market sentiment and the Euro’s strength.
The Euro could remain fairly appealing as a safe haven currency if markets edge away from riskier assets in the coming sessions.
On the other hand though, if the fissures in EU relations on fiscal stimulus persist and damage the bloc’s coronavirus response, the shared currency could come under fresh pressure.
The Pound to Euro (GBP/EUR) exchange rate is likely to remain jittery with movements limited until another notable shift in market sentiment or coronavirus development.
