GBP/EUR exchange rate retreats as EU passes historic Coronavirus recovery fund

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The Pound to Euro (GBP/EUR) exchange rate ticked lower this week as EUR investors were cheered by the passing of the EU’s coronavirus recovery fund.

Euro Soars on EU Recovery Fund Accord

The Euro has enjoyed considerable support over the past week after EU leaders finally reached an accord on the EU’s $750 coronavirus recovery fund.

After some initial profit taking as the agreement was announced, the single currency found itself as soaring this week, with investors flocking to the Euro on hopes the fund will help to facilitate a speedy recovery in Europe.

Also aiding in the Euro’s rise were the latest PMI figures from the Eurozone, which confirmed that the bloc’s private sector returned to growth in July, and further bolstered hopes for a swift recovery in the bloc.

Meanwhile, Sterling opened the week on strong footing, surging through the first half of the session on the back of rising market optimism, amidst more positive headlines regarding a coronavirus vaccine.

However, the pound was unable to sustain these gains against a resurgent Euro, especially in light of renewed Brexit uncertainty, as both the UK and UK warned a trade deal is some way off following the latest round of negotiations.

GBP exchange rate eventually stabilised towards the end of the week, with investors cheering the latest UK PMIs as business activity was shown to have soared to a five-year high in July.

Collapse in Second Quarter GDP to Drag on the Euro?

Turning to next week’s session, the main catalyst of movement in the GBP/EUR exchange rate looks to be the publication of the Eurozone’s latest GDP estimate.

This will be the first look at how the Eurozone economy fared through the second quarter, and could see the Euro relinquish some of its recent gains if growth in the bloc contracted sharper than expected.

Also of note for EUR investors will be the Eurozone’s consumer price index, with a slowing of inflation this month potentially putting more pressure on the single currency.

Meanwhile, in the absence of any notable UK economic releases, Brexit sentiment may continue to drive the Pound next week, likely leading to additional losses so long as trade talk progress remains limited.

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