Pound to Euro Exchange Rate Struggles to Hold its Ground as Euro Appeal Returns
The Euro (EUR) remains one of the most appealing major currencies on the market, so the Pound Sterling to Euro (GBP/EUR) exchange rate has been unable to hold its best levels. UK and Eurozone coronavirus jitters are worsening again today.
Last week was an impressive week for Sterling (GBP). GBP/EUR gained over a cent throughout the week, opening at 1.0977 and closing at 1.1109.
However, while GBP/EUR touched on a half-month-best of 1.1145 yesterday, the pair is sliding again today. At the time of writing GBP/EUR is trending in the region of 1.1078.
GBP/EUR has so far been able to sustain much of last week’s gains. However, GBP/EUR is still less than a cent above last week’s quarterly low of 1.0946.
Anticipation for Thursday’s Bank of England (BoE) news is likely to keep pressure on Sterling over the coming sessions.
Pound (GBP) Exchange Rates Lack Drive Ahead of Bank of England (BoE) Decision
Following last week’s surge in Sterling demand, this week’s Pound movement has been more mixed. While the Pound held its ground yesterday, the British currency is sliding today amid a lack of solid reason to keep it near its best levels.
A combination of poor UK data, Brexit jitters and uncertainty over the UK government’s coronavirus handling continue to hold pressure over the Pound outlook.
Sterling remains under pressure ahead of Thursday’s Bank of England (BoE) decision as well. It comes amid fears that the bank could take a dovish shift in tone or even show signs of edging towards negative interest rates.
Analysts are also anxious about speculation that the UK government is floating the idea of a new UK-wide lockdown to prevent a ‘second wave’.
Euro (EUR) Exchange Rates Remain Appealing despite Brief Weakness
Last week saw the Euro slump back from its highs, following months of impressive gains for the shared currency.
This was despite the Eurozone outlook remaining fairly positive overall. Markets have been optimistic about the EU and European Central Bank’s (ECB) handling of the coronavirus pandemic. This has helped the Euro to see stronger demand than rivals as the pandemic draws on.
As such, while EUR slipped from highs last week the currency continues to see strong support. Eurozone data continues to impress investors and the EU coronavirus outlook remains relatively optimistic as well. According to Analysts at MUFG:
‘Crucially, this positive sentiment is also reflective of the sound management of COVID in Europe. There are some risks to this of course. Spain in particular, but other countries too, have shown a notable escalation and containing the spread of COVID will be important for keeping EUR on a trend higher.’
Pound to Euro (GBP/EUR) Exchange Rate Awaits Bank of England (BoE) Decision
Wednesday’s European session will see the publication of many major UK and Eurozone datasets.
Markit’s final July PMIs for both the UK and Eurozone will be published. If UK services come in well above expectations, they could bolster the market’s UK outlook and support the Pound’s potential to sustain a recovery.
Eurozone retail sales results from June will be published as well. This could give markets a better idea of how Eurozone consumer activity has been weathering the coronavirus pandemic.
However, tomorrow’s major stats could be overlooked as markets await Thursday’s key Bank of England (BoE) policy decision.
The BoE is not expected to make any changes to monetary policy during this week’s policy decision. However, if the bank hints at looser monetary policy or shows any sign that it could consider negative interest rates, the Pound’s resilience could unravel.
Of course, the Euro is likely to remain appealing unless upcoming Eurozone data or coronavirus news shocks markets.
Overall, the Pound to Euro (GBP/EUR) exchange rate outlook has plenty of potential for losses this week.