Euro to Pound Exchange Rate Volatile as Coronavirus Jitters Leave Both Currencies Weak
Last week saw the Euro to Pound Sterling (EUR/GBP) exchange rate tumble, and this week so far the pair has been unable to mount a recovery. While coronavirus lockdown fears are weighing on Sterling (GBP) today, the Euro (EUR) remains weak on coronavirus jitters too.
After opening last week at the level of 0.9094, EUR/GBP spent the week trending with a downside bias.
The Pound benefitted from Euro weakness and EUR/GBP closed the week at the level of 0.9021. However the pair held above last week’s month and a half lows of 0.8984.
Since markets opened this morning, EUR/GBP has been fluctuating around this week’s opening levels. The pair trends slightly below those levels at the time of writing.
Investors are hesitant to buy the Euro, as US political uncertainty is boosting the appeal of Euro rivals like the safe haven US Dollar (USD).
Euro (EUR) Exchange Rates Remain Unappealing as Markets Avoid Risks
Last week saw the Euro tumble against major rivals like the Pound and US Dollar (USD), as the Eurozone’s coronavirus situation worsened.
Many major Eurozone economies, including Germany and France, are seeing fresh lockdown measures as the coronavirus second wave surges across the bloc.
The Euro has been weaker as a result, and demand for its safe haven rival the US Dollar (USD) has only further weighed on the shared currency.
According to Valeria Bednarik, Chief Analyst at FXStreet, market uncertainty is playing a big part in Euro weakness:
‘The main focus is the US presidential election, with voting ending this Tuesday, and the first results coming out on Wednesday. However, the final result may take up to two weeks, amid mail-in votes counting within the pandemic context. Majors are expected to remain within familiar levels ahead of the outcome.’
Pound (GBP) Exchange Rates Weak as UK Fails to Avoid Second Lockdown
Over the weekend, the UK government announced that as coronavirus infections continued to surge in Britain, it would have no choice but to begin stricter national measures to prevent further spread of the deadly virus.
The government has been under pressure from scientists to take stricter measures to prevent excess deaths from the pandemic.
While the government has stopped short of calling these new restrictions a lockdown, they are being perceived as a second national lockdown regardless.
Today’s UK manufacturing PMI beat forecasts. However, as Britain’s economy is expected to be hit hard by the coronavirus pandemic in the coming months, this did little to boost Sterling appeal.
Euro to Pound (EUR/GBP) Exchange Rate to Remain Volatile on Political Uncertainty
While there is no major Eurozone or UK data due for publication tomorrow, the Euro to Pound exchange rate could still be volatile. This is because global markets will turn attentions towards the US 2020 Presidential Election.
Many US citizens have already voted by mail this year due to the coronavirus pandemic, but those who haven’t will be heading to the polls during Tuesday’s American session.
Due to the coronavirus pandemic, it’s perceived as likely that the results of the US election may not become clear for days, perhaps even weeks. If a contested election appears more likely, market panic could lead to stronger demand for safe havens.
This could leave the Euro weaker, as its safe haven rival the US Dollar (USD) strengthens.
While the Euro will be driven largely by market sentiment and US Dollar strength, Eurozone and UK coronavirus developments could also drive the Euro to Pound exchange rate in the coming sessions.