Pound to Euro (GBP/EUR) Exchange Rate Steady as Downing Street Says Covid-19 Strengthens Brexit Deadline

April 16, 2020 - Written by John Cameron

STORY LINK Pound to Euro (GBP/EUR) Exchange Rate Steady as Downing Street Says Covid-19 Strengthens Brexit Deadline

GBP/EUR Exchange Rate Rangebound as Brexit Fears Return Amid Coivd-19 Crisis

The Pound to Euro (GBP/EUR) exchange rate held steady today after the British government stated that the coronavirus crisis only further strengthened the need for the UK to free itself of the European Union’s regulations post-2020. The pairing is currently trading around €1.148.

A Spokesperson for Downing Street told journalists:

‘Extending the transition would simply prolong the negotiations, prolong business uncertainty, and delay the moment of control of our borders. It would also keep us bound by EU legislation at a point when we need legislative and economic flexibility to manage the UK response to the coronavirus pandemic.’

As a result, the Pound (GBP) fell against many of its peers this morning as Brexit fears have added to the UK’s uncertain battle with the coronavirus.

The Pound (GBP) also struggled on rising expectations that the UK Government could extend its nationwide lockdown by up to three weeks, further contributing to Britain’s economic struggles businesses face several weeks of restrictions.

Today also saw the number of UK hospital coronavirus deaths rise by 861, bringing the total up to 13,729 and leaving GBP investors increasingly concerned over how the nation will cope in the coming weeks.

Euro (EUR) Steady as ECB Uncertain About Economic Impact of Covid-19

The Euro (EUR) failed to gain on the Pound (GBP) today after the Head of the European Central Bank (ECB), Christine Lagarde, said that she finds it difficult to predict the scale of the Eurozone’s recession due to the coronavirus.

Chief of the International Monetary Fund (IMF), Kristalina Georgieva, was also downbeat about the bloc’s economy saying: ‘we anticipate the worst economic fallout since the Great Depression’.

Mrs. Georgieva added:

‘I stress there is tremendous uncertainty about the outlook: it could get worse depending on many variable factors, including the duration of the pandemic.’

Today also saw the release of the Eurozone’s Industrial Production gauge for February, which put in a better-than-expected performance at -1.9%.

Bert Colijn, the Senior Economist for the Eurozone at ING, commented on the data:

‘February industrial production was already hampered by Covid-19 as the Chinese lockdown had already disrupted eurozone supply chains. Businesses indicated longer supply times in the February PMI for example, but this did not cause production to decline significantly.’

However, with the Eurozone’s manufacturing, industrial and services sectors expected to fall in March due to the coronavirus’ hold on Europe, confidence in the Euro is expected to dwindle.

GBP/EUR Forecast: Could Sterling Sink on Brexit and Covid-19 Fears?

The Euro (EUR) will remain sensitive to developments within Europe this week, with any further signs that countries heavily hit by the coronavirus – Italy and Spain for example – could ease their restrictions in light of a dropping number of cases would prove Euro-positive.

The GBP/EUR exchange rate could begin to fall, however, as the UK is now facing economic uncertainty not only over Brexit but with the ongoing coronavirus crisis. As a result, we could see the double-threat to the UK economy weaken the market value of Sterling.

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