The Pound to Euro (GBP/EUR) exchange rate made steady gains this week, with the pairing climbing to a three-week high amidst the EU’s failure to reach a unified fiscal response to the coronavirus crisis.
Euro Tumbles Amid Political Infighting Over Coronabonds
The Euro was met by a persistent sell-off this week, weakening against the Pound and the majority of its other peers over the EU’s lack of cohesion in its fiscal response to the coronavirus.
With widespread lockdowns putting significant stain on the Eurozone economy, those countries hit hardest by the coronavirus have been pushing for the bloc to begin issuing so-called ‘coronabonds’, but some members such as Germany and the Netherlands are reluctant to accept the risks posed by the joint debt.
The coronavirus crisis is clearly testing the strength of EU unity, something which severely undermined the appeal of the Euro this week.
Meanwhile the Pound maintained an upward trajectory this week, helped in part by end of quarter flows after falling into oversold territory in recent weeks.
However, Sterling’s gains have not come without some hurdles, as the UK reported a sharp surge in the number of coronavirus mortalities this week.
Euro to Face Further Losses as Coronavirus Crisis Continues?
Looking ahead to next week’s session, it’s safe to assume that coronavirus developments will continue to act as the main catalyst of movement in the GBP/EUR exchange rate.
In Europe this could see the Euro extend its downward trend so long as EU leaders are unable to find some sort of cohesion in their fiscal response to the coronavirus crisis.
However, these losses could be tempered if we see significant progress on the continent towards slowing the spread of the virus, with EUR investors particularly interested in whether cases in Italy may have started to peak.
Meanwhile, GBP investors will be keeping a close eye on UK coronavirus statistics, amid speculation that an acceleration in the number of reported cases could prompt the government to implement stricter restrictions.
Also of note will be the UK’s latest monthly GDP release, with a potential stalling of growth in February likely to reflect poorly on the Pound.
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