GBP/EUR exchange rate rangebound on second wave concerns

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The Pound to Euro (GBP/EUR) exchange rate traded in a fairly narrow range this week, as concerns over a second wave of coronavirus infections limited any upside in the pairing. 

Reopening Announcement Fails to Lift the Pound  

The Pound has struggled to find any upward momentum against the Euro this week as hopes for the reopening of more of the UK economy were undermined by concerns over a coronavirus resurgence. 

Boris Johnson announced on Tuesday that pubs restaurants and hairdressers will be allowed to reopen from 4 July as the government eases its 2m social distancing rules. 

However, this was swiftly followed by an open letter from UK health experts, addressed to the government, urging it to do more to prepare for a second wave of coronavirus outbreaks, concerns over which stifled Sterling sentiment. 

Meanwhile, the Euro made a couple of tentative advances against the Pound this week, but was unable to consolidate these gains. 

The Euro’s first brief rally came on the back of the Eurozone’s latest PMI figures, as economic activity in the bloc beat expectations this month and bolstered hopes for a return to growth in the third quarter. 

The single currency then made another attempt to advance in the middle of the week on the back of improving German business morale, but this quickly unraveled following reports the US is preparing to impose tariffs on $3.1bn worth of EU goods.  

Brexit Back in the Spotlight as ‘Intensified’ Talks to Begin 

Looking ahead to next week, it looks like we will see Brexit act as the main catalyst of movement in the GBP/EUR exchange rate, with the UK and EU set to kick off ‘intensified’ trade talks over the summer. 

Boris Johnson has previously stated his optimism that a deal could be reached in July with a ‘bit of oopmh’, however most observers are far more cautious in their outlook, with a number of key issues needing to be resolved before there is any chance of a deal. 

Expect to see the Pound come under some pressure next week if little progress is reported following the latest round of talks. 

Meanwhile, the focus for EUR investors at the start of next week looks to be on the Eurozone’s latest consumer price index. Will another month of deflation send the Euro lower? 

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