Will the Euro to Pound Rate Weaken Ahead? Coronavirus Uncertainty Rises Across Europe
The euro has endured some mixed fortunes throughout the Coronavirus pandemic, with the euro to pound rate rising and falling with global and domestic sentiments towards how well or badly markets views the European handling of the health and economic effects of COVID-19.
The coming months could provide plenty of new events to trigger volatility for Euro rates, with the market arguably rightly concerned about the extent to which what we might term now a second wave, will negatively affect the Eurozone.
The Euro struggled quite significantly back in February, when GBPEUR rates rose to the interbank level over 1.20, and EURUSD dropped to 1.08. At this time, the main concern was how the economic conditions would effect debt troubles in the Eurozone.
Despite many warnings over how the Eurozone finances debt amongst member states, the European leaders ultimately came through with a bailout plan and worked together to show unity and coordination in their tackling of the worst fears.
The €750 bn pandemic program since agreed by Eurozone leaders has seen the Euro rising, and has presented the currency market with plenty of fresh optimism for the Euro. Where financial markets questioned the British and American leadership and management of the crisis, investors have warmed to the Eurozone’s methodical and logical approach.
This helped the Euro to rise at it’s peaks to 1.09 against the pound and over 1.20 on the EURUSD rate, both interbank levels. Since then however, fresh cases of Coronavirus in Europe have taken the edge off the Euro, with levels at 1.11 on GBPEUR and EURUSD 1.18 now.
What Next for the Euro Against the Pound and the US Dollar?
The currency markets are finishing August in trepidation of what could be a tumultuous few weeks and months ahead for the Euro. This is because we have a series of events which whilst not directly emanating from the Eurozone, could alter attitudes towards the pound and the US dollar, and influence the Euro rate.
Firstly, Brexit is a key consideration for GBPEUR levels ahead. Talks are ongoing but we are not any further ahead and with literally months until the transitional phase expires, we are left waiting to know what the UK’s future relations with its biggest trading partner will be.
Generally speaking, it is loosely felt that signs of a deal on Brexit could send GBPEUR levels higher towards the mid and high teens, whilst signs of a no-deal could see moves underneath 1.10 with many predictions of parity or 1 GBP for 1 Euro being recorded in recent years.
Secondly, the US election in November seems likely to become an increasingly important issue. We have already seen quite excessive movement on EURUSD exchange rates this summer with level having steadily climbed 10 cents from those February and March lows.
Big movements on the US dollar can move EURUSD exchange rates which are the most heavily traded pairing in the world. Part of the recent strength for the Euro against many currencies is actually down to US dollar weakness as well as Euro strength.
What European Issues Will be in Focus?
There is a continued focus on monetary policy by the ECB (European Central Bank) who continue to come up with measures to soothe market fears over the allocation of debt within the Eurozone. The series of loans and grants that make up the €750 pandemic program in the Eurozone has helped to keep the single currency stronger but could easily be upset.
Key events ahead will continue to be how well or badly Europe tackles the Coronavirus pandemic. With such important economic and health effects as a result of the virus, the currency market will be keen to see if further lockdowns are necessary and the economic consequences could be severe.
Europe relies heavily on global tourism and the closing of borders will have had a major impact on many countries like Greece, Spain and Portugal. With Brexit looming, it will be more important than ever for the EU and the UK to work closely in the coming months.
Just how well or badly this goes, and how well or badly the battle against Coronavirus goes will be key issues ahead to move the market.
The Coronavirus has made the currency markets even more unpredictable and volatile in many respects, and we can help share with you the latest news and provide tools to help provide you make an informed decision and strategy on your transfer.
If you would like to discuss the markets in more detail, please do contact me directly using the form below.
The post Will the Euro to Pound Rate Weaken Ahead? Coronavirus Uncertainty Rises Across Europe appeared first on Euro Rate Forecast.
Source: https://www.eurorateforecast.com/2020/08/will-the-euro-to-pound-rate-weaken-ahead-coronavirus-uncertainty-rises-across-europe/
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