The GBP/EUR exchange rate is currently trading in the region of €1.11, up slightly thanks to broad-based weakness in the Euro. EUR/USD has tumbled to $1.16 as investors flock to the safe-haven US Dollar in the face of rising coronavirus cases.
Political Anxiety Trumps Positive Data to Drag Pound Down
The Euro fell victim to some significant selling pressure over the past week as Europe’s coronavirus woes weighed heavily on the single currency.
EUR investors were particularly unnerved by the announcement that France and Germany would be imposing new national lockdown measures after the Eurozone’s two largest economies suffered record rises in infections.
Putting additional pressure on the Euro was the European Central Bank (ECB) as President Christine Lagarde warned that risks to the Eurozone’s economy are tilted to the downside, and the bloc faces a ‘very negative’ November.
This downtrend in the Euro persisted through the end of session in spite of the Eurozone reporting a record jump in GDP in the third quarter.
The Pound, meanwhile, has fluctuated throughout the week, amidst a mix of Brexit and coronavirus uncertainty.
On the Brexit front, there has been some modest optimism this week as EU chief negotiator Michel Barnier’s decision to extend his stay in London to continue ‘intensive’ talks with his UK counterpart was seen as a potential sign of positive progress.
However, at the same time, upside potential in the Pound has been limited by renewed speculation the UK is headed towards a second lockdown as pressure on the government to take more drastic action grows amid a surging infection rate.
GBP/EUR Exchange Rate Outlook: Politics to Remain in the Spotlight as EU Election Votes Counted
Tuesday’s US presidential election is sure to be at the top of the agenda next week, potentially adding to the safe-haven appeal of the US Dollar amid the threat of a prolonged result process stoking US political uncertainty.
Also of note to USD investors will be the Federal Reserve’s latest policy meeting, as they look to the Fed for more direction on how it will support the US economy heading into what looks to be a very bleak winter.
Across the pond, the Bank of England (BoE) will also conclude its latest policy meeting next week, with the injection of fresh Quantitative Easing (QE) potentially helping to lift the Pound.
However, Sterling gains could easily be scuppered if there are fresh setbacks in Brexit negotiations or the UK moves closer to a full lockdown.
Finally, the Euro is likely to remain vulnerable to additional losses next week, so long as European coronavirus cases continue to skyrocket.
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