The GBP/EUR exchange rate plummeted to a new five-month low this week, as the Pound lost out amidst the coronavirus driven sell-off.
BoE Rate Cut and UK Budget Fail to Stem Sterling’s Losses
The Pound fell sharply against the Euro this week, as the UK currency appeared more vulnerable to the coronavirus panic selling which rocked markets.
Not even the intervention of the Bank of England with an emergency rate cut and the announcement of £30bn worth of coronavirus stimulus in the UK Budget in the mid-week seemed to provide any lasting support for GBP exchange rates.
The GBP sell-off then gathered pace in the latter half of the week, with GBP/EUR slumping to a new five-month low as fresh Brexit uncertainty combined with coronavirus fears weighed heavily on Sterling sentiment.
Meanwhile the Euro roared higher at the start of the week in spite of Italy stepping up its coronavirus containment measures by quarantining the entire country.
This upswing in the single currency appeared to be mostly driven by a plunge in the US Dollar, which caught up in Monday’s market chaos.
The Euro then extended its gains through the second half of the week as the European Central Bank (ECB) announced plans to expand its quantitative easing programme in an effort to help limit the economic impact of the coronavirus.
Coronavirus to Continue to Dominate Movement in GBP/EUR?
Looking ahead, we expect coronavirus developments to continue to act as the main catalyst of movement in the Pound to Euro exchange rate next week.
Other events which may also impact the pairing include the UK’s latest jobs report.
This could see Sterling find some support if the post-election bounce resulted in the unemployment rate falling in January as some economists suspect.
At the same time, the Euro could come under pressure in the first half of the week with the publication of the ZEW economic surveys.
These are forecast to report a sharp drop in Eurozone economic sentiment in March as coronavirus concerns, and fears the disease will plunge parts of the bloc into recession dampen the outlook of economists.