Pound Euro Exchange Rate Outlook Struggles for Meaningful Footholds in Week of Coronavirus Gloom

Pound Euro Exchange Rate’s Recovery Attempts Have Been Limited 

Despite a lack of particularly strong Euro (EUR) support this week, the Pound Sterling to Euro (GBP/EUR) exchange rate has been kept under pressure. The Pound (GBP) has been unable to mount a meaningful recovery from the plunge seen at the beginning of the week. 

After opening this week at the level of 1.1231, GBP/EUR briefly jumped and touched on a four-month-best of 1.1260. Since then though, GBP/EUR plunged and has been trending lower. 

While it is up from this week’s lows of 1.1016, GBP/EUR’s recovery attempts have been highly limited. At the time of writing on Friday, GBP/EUR is trending in the region of 1.1100. 

Unless something in Britain’s outlook improves, investors may not see much impetus to start buying the Pound again. 

Pound (GBP) Exchange Rate Recovery Attempts Limited amid Lack of Good News 

At the beginning of the week, the Pound was sold in reaction to news of a third UK national lockdown. Since then, a lack of fresh good news has left investors with little reason to mount a Pound recovery. 

This week’s UK PMI results from December largely fell short of expectations. It indicated that Britain’s economy was not performing as resiliently as hoped amid the coronavirus pandemic. 

Amid speculation of negative interest rates in the UK, as well as expectations that rival economies will continue to outperform Britain on the pandemic, the Pound remains unappealing. 

According to Economists at MUFG: 

‘The additional hit to GDP from this latest more infectious COVID-19 wave will we believe result in a rate cut from the BoE in February. We now expect the BoE to lower the key policy rate into negative territory in February based on the increased severity of Covid. The trade deal with the EU will not be enough to offset BoE concerns.’ 

Euro (EUR) Exchange Rates Dip Amid Lack of Drive 

While the Euro continues to sustain most of this week’s gains against the weak Pound, a dip today made it easier for GBP/EUR to edge away from weekly lows. 

Investors have little reason to keep buying the Euro. Much of this week’s Eurozone data has been underwhelming, and the Eurozone outlook has not seen notable positive news overall. 

As a result, rebounds in the Euro’s rivals, like the US Dollar (USD), have knocked the Euro slightly. 

The Euro was a little weaker today due to a small jump in US Dollar gains due to the negative correlation the currencies share. 

Pound Euro (GBP/EUR) Exchange Rate May Flounder Until UK Outlook Improves 

The Pound to Euro exchange rate may struggle to mount more of a recovery unless there are some surprising upsides in the Pound outlook. 

Concerns over the coronavirus pandemic’s impact on Britain’s economy, as well as the threat of negative interest rates from the Bank of England (BoE), could keep a lid on Sterling rebounds. 

Next week’s economic calendar will be quieter as well. There is less news that could potentially boost the Pound higher. 

Some key figures due next Friday include UK trade balance, production and of course growth rate stats from November. If these impress they could boost hopes of Britain’s economic resilience amid the pandemic. 

As for the Euro, next week’s economic calendar is even quieter. The only data of note is Eurozone industrial production on Wednesday and Eurozone trade balance data on Friday. 

Of course, the Euro will continue to be driven by movement in rival currencies like the US Dollar (USD) as well. 

Without new surprises, the Pound Euro exchange rate may lack the drive to climb to near its highs again.