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GBP to EUR Exchange Rate Avoids Losses as Markets Steady Ahead of Key Fed News and Eurozone Data

July 28, 2020 - Written by John Cameron

Despite a lack of solid fresh support for the Pound, the British Pound to Euro (GBP/EUR) exchange rate has been holding its ground a little better today, recovering from the lows seen yesterday. The Euro remains broadly appealing, but weeks of strong performance mean that its rally is running out of steam. On top of this, investors are hesitant to make big moves on either currency ahead of major upcoming Federal Reserve news and Eurozone data.

Last week’s movement was mixed. After opening the week at the level of 1.0999, GBP/EUR briefly saw a strong rebound in demand. However, the pair was unable to hold this recovery attempt and actually ended up closing the week lower, near the level of 1.0977.

Since markets opened this week, GBP/EUR briefly tumbled even lower. GBP/EUR touched on a low of 1.0934 yesterday, which was the pair’s lowest level all month. GBP/EUR did recover slightly and trend closer to the week’s opening levels again at the time of writing today though.

GBP Exchange Rates Avoid Losses despite Gloomy UK Outlook

Investors have been attempting to buy the Pound back a little from its lowest levels again today.

The British currency is cheap after being hit by domestic coronavirus and Brexit concerns in recent weeks.

As a result of its cheap levels, investors are hesitant to sell the Pound much lower without fresh reason to. This is helping the Pound to rebound slightly from its lows.

Sterling is also benefitting slightly from speculation and hopes for progress in coronavirus vaccine development. This is because one of the more notable vaccine attempts is being handled by a UK company.

On top of this, the latest UK retail data from the Confederation of British Industry (CBI) did beat forecasts today.

However, the Pound’s potential for gains is highly limited. Not only is this due to underlying coronavirus and Brexit jitters and strength in the Euro, but also concerns about Britain’s outlook being gloomy overall.

UK thinktank NIESR published its latest economic forecasts today. The group speculates that Britain’s key unemployment rate could well hit 10% by the end of the year as the government’s furlough scheme unravels.

According to Garry Young, Deputy Director at NIESR:

‘The planned closure of the furlough seems to be a mistake, motivated by an understandable desire to limit spending. The scheme was intended by the chancellor to be a bridge through the crisis and there is a risk that it is coming to an end prematurely and this increases the probability of economic scarring.’

EUR Exchange Rates Slip but Outlook Remains Strong

The Euro has consistently been one of the market’s most appealing major currencies in recent months.

Over the past week, it has only seen more notable support with EU officials agreeing to a sweeping EU Recovery Fund to help recover from the coronavirus pandemic.

Eurozone data also continues to impress investors, bolstering hopes that the Eurozone economy is handling the pandemic better than some other major economies.

As a result, today’s Euro losses are more due to the currency steadying as its rally slows.

There has been little reason to keep buying the Euro higher this week, but the Eurozone outlook remains comparatively strong regardless which is helping the shared currency to keep trending relatively close to highs and avoid losses.

GBP/EUR Exchange Rate Forecast: Fed News and Eurozone Data in Focus

While this week’s UK economic calendar is fairly quiet, there is still plenty for Pound to Euro exchange rate investors to react to over the coming sessions.

Wednesday will see the publication of France’s July consumer confidence report. However, tomorrow’s biggest event will be the Federal Reserve’s July policy decision.

Any sign that the Fed could take a more dovish stance on US monetary policy could lead to fresh US Dollar (USD) weakness. As the US Dollar is the Euro’s biggest rival this could boost the Euro’s appeal.

Then, later in the week, slews of key Eurozone data will be published which could influence the Eurozone outlook if they surprise.

Thursday will see the publication of German growth and unemployment data, as well as Eurozone unemployment and consumer confidence.

This will be followed on Friday by German retail stats, French growth and inflation data, and overall Eurozone growth and inflation figures.

As for the Pound, any surprising developments in Britain’s coronavirus or Brexit situations could also influence the Pound to Euro exchange rate this week.
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