GBP/EUR exchange rate rocked by coronavirus jitters

The Pound Euro (GBP/EUR) exchange rate traded in a wide range over the past week, amidst mixed coronavirus and Brexit headlines. 

Euro fluctuates amid Delta variant concerns 

The Euro got off to a poor start this week, with the single currency’s strong negative correlation with the US Dollar, propelling it lower as USD exchange rates strengthened. 

This downside in EUR exchange rates in the first half of the week was also driven by concerns that Europe is experiencing its third wave of coronavirus infections, due to the rapid spread of the Delta variant. 

However, the Euro then rallied sharply in the latter half of the week, after the Eurozone’s latest manufacturing PMI printed above expectations, reporting that factory activity in the bloc struck a new record high in June. 

At the same time, the Pound opened this week’s session on some strong footing, supported by an easing of Brexit tensions between the UK and EU. 

After a brief pullback in response to domestic coronavirus concerns, Sterling made another move higher in the middle of the week, in response to some hawkish comments from departing Bank of England (BoE) Chief Economist, Andy Haldane. 

However, the Pound quickly fell back again after BoE Governor Andrew Bailey refuted some of the points made by Haldane, while reiterating his stance that the recent rise in inflation is ‘transitory’. 

Boris Johnson’s update on Coronavirus in focus 

Turning to next week’s session, a potential announcement from Boris Johnson, detailing what restrictions will be lifted on 19 July is likely to act as a key catalyst of movement in the GBP/EUR exchange rate. 

Certain measures like wearing masks and social distancing may remain in place past ‘freedom’ day’, but so long as the majority of restrictions on economic activity are lifted there is scope for the Pound to appreciate.  

Also influencing GBP exchange rates will be the latest UK GDP release. Will robust growth in May help to bolster the Sterling sentiment towards the end of the week? 

Meanwhile, the focus for EUR investors will be the latest German ZEW survey, with the Euro likely to face some headwinds if economic sentiment in the Eurozone’s largest economy continued to soften this month. 

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