Pound, Pound to Euro Weakens Further | Finance Brokerage

Pound to Euro Weakens Further

The pound to euro exchange rate outlook shows weakness in the wake of the British government’s stricter stance on COVID-19. The pandemic remains its biggest focus as the exchange rate outlook goes to near half-year worst.

Forex updates show a gloomy trade for Sterling as GBP/EUR lost half a cent this week. It incurred sharp losses as GBP/EUR fell five cents from the level of 1.1556 to 1.1035 last week. Also, it touched a new 6-month low of 1.0933 overnight.

Domestic COVID-19 jitters kept the currency from capitalizing on the euro’s latest weakness. The euro continues to benefit from safe haven demand. However, the pound knocked as the UK government toughened its approach towards taking action on the coronavirus outbreak.

Many businesses announced they would close. Moreover, layoffs and concerns over the survival of smaller businesses worried investors and weighed on the currency’s appeal.

Analysts Predict Losses are Likely to Stay

The Pound to Euro (GBP/EUR) exchange rate outlook will be dominated by the coronavirus outbreak. It has been bearish on forex trading this week and losses are likely to stay. 

Analysts predict the spread of COVID-19 will bring a stronger negative impact on Britain’s economy. This prediction came after the government ramped up measures to delay the spread of the virus.

Bank of England (BoE) interest rate cut bets are also rising. With that, analysts are predicting more action from the BoE in response to the worsening situation. 

According to Analysts at ING, markets could potentially see more BoE stimulus coming through soon. They are seeing for example a 15-basis-point rate cut and potentially £100bn+ Gilt buying QE (quantitative easing) scheme.

The Deepening Concerns on the Pound

The increasing fears relating to the coronavirus outbreak overtake data on Eurozone’s inflation rate to influence the European Central Bank. 

These deepening concerns of the British economy could keep the currency under pressure. Hence, it can make it harder to recover from its recent lows.

On the other hand, the euro will continue to be driven by safe-haven demand and rival strength. However, the euro can weaken again if its rival, the US Dollar, begins to see a surge in demand. 

In more forex news, the surge in the US Dollar is another blow to emerging markets. Mitul Kotecha, Senior Emerging Markets Strategist at TD Securities in Singapore said the demand for the dollar outweighed any hit. 

Turkey’s central bank was the latest emerging market to make an emergency rate cut. Many others have already eased this week after Federal Reserve has done action. South Korea, Chile, Vietnam, Sri Lanka and Pakistan are among them. 

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