GBP/EUR Exchange Rate Rises as French Economic Outlook Darkens
The Pound to Euro (GBP/EUR) exchange rate saw an uptick of 0.1% today after the French Finance Minister Bruno Le Maire said that he expects the French economy to contract by -8% this year dur to the coronavirus pandemic. The pairing is currently trading around €1.148.
Analysts at Bloomberg commented:
‘France’s actions are weighing heavy on public finances as the state is covering the majority of the incomes of furloughed workers, delaying or even cancelling tax collection, and guaranteeing loans to avoid bankruptcies.’
The Euro (EUR) continues to struggle against Sterling despite signs of coronavirus-related deaths in heavily hit countries like Spain and Italy levelling off, while France and Austria are discussing the possibility of easing restrictions on their respective lockdowns.
Spain saw the lowest number of new cases since 20th March today which has increased pressure on the Government to relax its state of emergency.
The EUR/GBP exchange rate also suffered after International Monetary Fund (IMF) announced that the global economy could face its worst recession since the Great Depression.
Gita Gopinath, the Chief Economist at the IMF, commented:
‘It is very likely that this year the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago. The Great Lockdown, as one might call it, is projected to shrink global growth dramatically.’
Pound (GBP) Exchange Rate Rises as Boris Johnson Set For Recovery
The Pound (GBP) continued to rise today after it was revealed that Prime Minister Boris Johnson had been released from intensive care after his coronavirus diagnosis. This has continued to buoy hopes that Britain’s political-financial infrastructure could now begin to stabilise.
Gaétan Peroux, a Strategist at UBS, was upbeat about the GBP’s performance going forward, commenting:
‘We continue to see upside potential for Sterling. Despite its relative liquidity, the Pound was one of the G10 currencies most harshly punished by the dollar funding squeeze, possibly due to the UK’s large financial sector. As this issue seems to have been resolved, we expect Sterling to regain its lost ground by mid-year.’
However, with the UK now facing its fourth week of lockdown the economic outlook continues to darken.
This was confirmed by the Office for Budget Responsibility (OBR) which said that Britain’s economy could shrink by -35% in the second quarter and see a rocketing of unemployment by up to 2 million.
The OBR said in its statement:
‘Evidence from past pandemics suggests that the economic impact of the coronavirus will arise much less from people falling ill or dying than from the public health restrictions and social distancing required to limit its spread.’
‘This will reduce demand for goods and services and the ability of businesses and public sector institutions to supply them.’
GBP/EUR Outlook: Could Sterling Sink as Coronavirus Ravages UK Economy?
We could see the Euro (EUR) edge higher tomorrow if Europe’s coronavirus death toll continues to plateau in countries like Italy and Spain. This would place further pressure on the bloc’s nations to consider easing lockdown restrictions which would help kickstart the Euro-area’s economic recovery.
The GBP/EUR exchange rate could dip tomorrow if the UK’s economic outlook continues to darken. Any indications that the lockdown could continue well into May would prove Pound-negative.
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