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Euro Pound (EUR/GBP) Exchange Rate Flat on WHO’s Warning of Coronavirus Resurgence

August 20, 2020 - Written by John Cameron

Euro Pound Sterling (EUR/GBP) Exchange Rate Muted as WHO Warns of Covid-19 Resurgence in Europe

The Euro Pound Sterling (EUR/GBP) exchange rate remained largely flat on Thursday, leaving the pairing trading at around £0.9017.

The single currency remained flat against Sterling this morning after Germany announced it had recorded its highest number of Covid-19 cases since late April.

The bloc’s largest economy recorded 1,707 cases over the past 24 hours, while a further 10 deaths were recorded.

Meanwhile, both France and Spain also recorded increases in coronavirus cases over the last 24 hours.

Spain’s health ministry announced 3,715 coronavirus cases were diagnosed, a new record since the country emerged from its lockdown in June.

Meanwhile, France recorded the fastest increase in cases since May which weighed on Euro sentiment.

Italy also reported a sharp increase in infections, and while the numbers are not as high as some countries, 642 new cases is the largest daily increase since late May.

The World Health Organization’s (WHO) European director general noted that European countries were registering an average of 26,000 new cases daily. Hans Kluge warned the increase in cases could lead to a potential resurgence of the pandemic.

WHO’s director general, Hans Kluge stated:

‘The risk of resurgence has never been far away. In the last two months, new cases have been steadily increasing every week in the Region. There were 40,000 more cases in the first week of August, compared to the first week of June, when cases were at their lowest.

‘Every day now the European Region reports an average of over 26,000 new [coronavirus] cases. This is due in part to the relaxation of public health and social measures, where authorities have been easing some of the restrictions and people have been dropping their guard.’

Sterling (GBP) Flat as UK Not Expected to Reach Pre-Covid Growth for Two Years

The Pound struggled to make gains against the Euro this morning after a poll of economists from Reuters revealed it is unlikely Britain’s economy will reach its pre-coronavirus pandemic size for at least two years.

However, the poll did find economists expect there is only a small chance the Bank of England (BoE) will send interest rates into negative territory to help boost growth.

The Pound has struggled as Britain has suffered the highest coronavirus death toll in Europe and fallen into a recession. The UK suffered a record -20.4% contraction in the second quarter, the worst slump recorded by any major economy so far during the crisis.

Although, as many coronavirus restrictions are being eased across the country, economists are expecting growth to pick up and GDP to rebound by 15.1% in the current quarter.

Commenting on this, Samuel Tombs at Pantheon Macroeconomics noted:

‘The severity of the slump was chiefly a by-product of the very long lockdown in the UK, necessitated by the government’s laissez-faire attitude in the early days of the pandemic, which meant the virus spread more widely than in other countries.’

Euro Pound Outlook: August’s Flash PMIs in Focus

Looking ahead to tomorrow’s session, the Pound (GBP) could make gains against the Euro (EUR) following a slew of upbeat data.

Sterling will jump if data reveals that consumer confidence has improved more than forecast while retail sales picked up, and flash PMI data shows activity in the construction and services sector expanded more than expected.

Although, upbeat PMI surveys from across the Eurozone could also offer the single currency some support.

If August’s flash PMI composite rises higher than expected it will boost the Euro and leave the Euro Pound (EUR/GBP) exchange rate largely flat.

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