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Pound Euro (GBP/EUR) Exchange Rate Edges Higher as German Recession Inevitable

March 30, 2020 - Written by John Cameron

Pound Sterling Euro (GBP/EUR) Exchange Rate Rises as German Recession Inevitable

The Pound Sterling Euro (GBP/EUR) exchange rate edged higher today, leaving the pairing trading at around €1.1198.

The single currency remained under pressure today, as Germany’s council of advisors warned that output in the country could shrink by up to 5.4% this year.

They also noted that the outbreak has made a recession in the block’s largest economy inevitable.

In a report handed to the German government last week, but published today, the advisors said:

‘The coronavirus outbreak has stopped the incipient recovery. The German economy will shrink significantly in 2020.’

Added to this, the Euro suffered further following the release of weak Eurozone economic sentiment data.

This morning’s data revealed that sentiment in the block suffered its steepest monthly decline since records began in 1985.

The coronavirus pandemic led to declining confidence amongst consumers and all sectors of the bloc’s economy. And in many cases, confidence fell before the crippling lockdowns were in place across the Eurozone.

Sterling (GBP) Rises despite UK Credit Ratings Downgrade

The Pound remained under pressure today as traders remained focused on the coronavirus, as global measures to help stop the spread of the virus tightened.

Sterling began to suffer losses against the US Dollar (USD) once again, as traders flocked back to the safety of the Dollar as the United States emerged as the new coronavirus epicentre.

However, against the GBP/EUR exchange rate rose higher after a slew of disappointing Eurozone data.

Meanwhile, the UK’s economic outlook received a blow after being issued with a credit ratings downgrade.

Ratings agency, Fitch slashed the country’s sovereign debt rating on Friday, after stating the county’s debt levels would increase as the government ramped up spending due to the ongoing pandemic.

Commenting on this, Jane Foley, currency strategist at Rabobank in London said:

‘The fundamentals suggest Sterling is vulnerable. One of the interesting parts of the [Fitch] downgrade was pointing not just to the worsening of public finances but also the Brexit element, pointing to concerns about the UK’s trade agreement with the EU.’

Added to this, Foley also said that the confirmation that Prime Minister Boris Johnson has tested positive for coronavirus and shown symptoms is Pound-negative.

Pound Euro Outlook: Will GBP/EUR Remain Flat?

Looking ahead, the Pound (GBP) could suffer some losses against the Euro (EUR) following the release of GfK’s consumer confidence data.

If UK confidence slumps further than expected in March, it will cause Sterling to fall against the Euro.

Meanwhile, the single currency could suffer losses following the release of Eurozone inflation data.

If inflation in the bloc disappoints, it will weigh on EUR, and with weak UK consumer confidence, is likely to leave the Pound Euro (GBP/EUR) exchange rate largely flat.

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