Pound to Euro Exchange Rate Continues Tumble Even after Last Week’s Plummet
Investors continued to sell the Pound (GBP) when markets opened today, and the Pound Sterling to Euro (GBP/EUR) exchange rate tumbled further. Even with the Euro’s (EUR) domestic support mixed, it is currently among the market’s more appealing majors.
Last week was a significantly bearish week for GBP/EUR. The week saw it shedding essentially all of the gains it had seen since the beginning of the year, erasing months of rising confidence in Pound investors.
GBP/EUR opened last week at the level of 1.1945 and lost over three cents throughout the week, closing near the level of 1.1625.
GBP/EUR continues to fall today and currently trends near a low of 1.1519. This is the worst level for the pair since October 2019.
The biggest news for the Pound this morning is a surge in Bank of England (BoE) interest rate cut bets. It comes in reaction to ongoing developments regarding the global spread of coronavirus Covid-19.
Pound (GBP) Exchange Rates Continue to Tumble on Bank of England (BoE) Rate Cut Bets
Downside pressure just continues to pile onto the Pound over the past week or so. Following all of last week’s fresh concerns over Brexit and Britain’s economic outlook, Bank of England (BoE) interest rate cut bets have now risen as well.
When markets opened this week, the Bank of England said that it would take ‘all necessary steps’ to protect Britain’s economy from the outbreak of coronavirus Covid-19.
In reaction to the bank’s comments, BoE interest rate cut bets soared and the Pound plummeted. Markets are now betting the BoE could cut UK interest rates as soon as this month.
Other factors continue to weigh on the Pound as well, including market concerns that UK-EU Brexit talks could end without a deal.
Euro (EUR) Exchange Rates Benefit from Recoveries in Eurozone Manufacturing
The Euro has been among the most appealing major currencies over the past week. This has been largely due to broad weakness in its biggest rivals, including the Pound and US Dollar (USD).
As the Euro and the US Dollar share a negative correlation the Euro often gains in times of US Dollar weakness. The Euro has advanced as Federal Reserve interest rate cut bets hit the US Dollar.
However, while this was the primary cause of EUR strength, some other factors are supporting the shared currency today. The Eurozone’s final February manufacturing PMIs came in stronger than expected in many key prints.
According to Chris Williamson, Chief Business Economist at IHS Markit:
‘Despite widespread reports from companies that the coronavirus outbreak disrupted supply chains and hit foreign sales, February saw encouraging signs that the Eurozone’s manufacturing downturn is easing,’
Pound to Euro (GBP/EUR) Exchange Rate Outlook Could Worsen on BoE and Brexit
The Pound continues to slump as investors become increasingly concerned about Britain’s economic outlook.
Concerns that Covid-19 will spread further in Britain and hit economic activity are rising alongside fears of a potential hard Brexit. Markets are anxious that Britain’s economic confidence and activity could be notably hindered by these developments.
Pound investors will now be even more highly anticipating the Bank of England (BoE) policy decision later this month. However, UK-EU Brexit negotiations set to be held this week are also likely to be influential.
Upcoming UK services PMI data could cause some movement as well if it surprises investors. However, in terms of data, upcoming Eurozone data is even more likely to be influential.
Key Eurozone data will be published throughout this week. Unemployment and inflation rate data will be published tomorrow, with services PMI and retail sales stats on Wednesday.
Any big movements in Euro rivals like the US Dollar (USD) could also influence the Pound to Euro (GBP/EUR) exchange rate outlook.
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