The GBP/EUR exchange rate trended higher this week as growing concern over the recent rise in European coronavirus cases dragged on the Euro.
Spike in Coronavirus cases takes its toll on the Euro
The Euro has found itself on the defensive again this week, amidst growing fears the Europe’s coronavirus resurgence is stifling the Eurozone’s economic recovery.
This was highlighted by comments from the World Health Organisation’s (WTO) European Chief Dr Hans Kluge, as he warned that cases are on the rise again in 32 parts of Europe and that the coronavirus is a ‘tornado with a long tail’.
However there was a brief spot of optimism for EUR investors early in the week, after German GDP was revised slightly higher in the second quarter and the country’s business climate index struck its best levels since February.
The Pound, meanwhile, got off to a poor start this week, with Brexit uncertainty dragging on Sterling.
While these concerns lingered through the week, GBP investors appeared willing to shrug them off, as the Pound was propelled higher.
This uptick in Sterling sentiment was partly attributed to Downing Street’s rejection of rumours that Boris Johnson’s would step down as Prime Minister within six months as he struggles with the lingering effects of the coronavirus.
Lacklustre Eurozone inflation to extend Euro sell-off?
Looking ahead to next week’s session, the main catalyst of movement in the Pound to Euro exchange rate looks to be the publication of the Eurozone’s consumer price index (CPI).
August’s preliminary release is forecast to show that inflation began to decelerate again, likely pouring the pressure on the Euro as it will stoke concerns that the Eurozone’s economic recovery has started to stall.
EUR investors will also be watching the latest German industrial releases closely for any signs of an uneven economic recovery in the Eurozone’s largest economy.
Meanwhile, the Pound could find some support if August’s final PMIs confirm that the UK’s private sector enjoyed a bumper month of growth.
However these gains could be tempered should changes to the government’s furlough scheme at the start of September trigger a massive wave of redundancies.