The Pound to Euro (GBP/EUR) exchange rate rallied this week, as some oversold conditions and the UK’s government’s imposing of a strict lockdown helped to bolster the appeal of Sterling
Sterling Bounces Back From Low as UK Lockdown Comes into Effect
After an abysmal session last week, the Pound looked set for another tough time at the start of this week, with the GBP/EUR exchange rate falling as low as €1.06 on Monday.
However, Sterling was quick to bounce back after Boris Johnson finally imposed a strict lockdown on the whole of the UK in an effort to contain the spread of the coronavirus.
While GBP/EUR struggled a little in mid-week trade, the Pound was able to roar back into life in the latter half of the week. Rising on the back of broad weakness in the US Dollar, and highlighting Sterling apparent transition into a risk-sensitive currency during the coronavirus crisis.
Meanwhile, while the Euro was able to take advantage of the Pound’s initial weakness, it faced some headwinds in the first half of the session as the Eurozone’s composite PMI came in at just 31.3, plummeting to a new record low amidst the coronavirus shutdown.
The single currency then struggled to hold its ground against a resurgent GBP in the latter half of the week as Eurozone data continued to print poorly, stoking fears over the bloc’s already fragile economy.
More Coronavirus Volatility Ahead?
Looking ahead to next week’s session, it’s safe to assume that the coronavirus crisis will continue to act as the main catalyst of movement in the GBP/EUR exchange rate, likely infusing further volatility in the pairing.
This could prove particularly problematic for the Pound as UK coronavirus cases are still on the rise, and analysts warning the worst is still yet to come.
In terms of data, the Euro may take a knock at the start of the session with the publication of the Eurozone’s latest economic sentiment index, which is expected to have fallen to its worst levels since the Eurozone debt crisis as the bloc wrestled with a major coronavirus outbreak this month.