Amid the coronavirus chaos, we have continued to see significant disruptions across global currency markets. Within these turbulent times, however, there appears to be one currency which has outperformed its peers. The euro has remained one of the strongest currencies since news of the coronavirus first broke. Here we summarise the euro’s performance, the GBP/EUR latest news and the most recent currency movements.
Summary of how the GBP/EUR market has performed
The GBP/EUR rate has become something of a battle over the past few months. While the euro has continuously remained the stronger opponent, we began to see some promising progress in the pound last week.
Sterling was able to recover some lost ground as the Bank of England began quantitative easing tactics. Strategies began last week as we saw the UK slash interest rates and began to witness some signs of stabilisation within global markets.
This week, however, sterling has sadly seen a decline in its strength. It looks as though the GBP/EUR pairing could even be prone to further deterioration.
At the time of writing the (GBP) pound is trading at 1.08 against the euro. The drop is a 1% decline in just 24 hours. Sterling could potentially fall even further due to Boris Johnson’s UK lockdown announcement last night.
As the coronavirus continues its global torment, the outlook for the GBP/EUR pairing could remain bleak for some time.
GBP/EUR reaction to UK lockdown
The primary reason for the sudden drop in the pound was down to last night’s lockdown news. Prime Minister, Boris Johnson, announced that the UK would go on lockdown in a bid to ease the spread of the coronavirus. The public can only leave the house for the following exceptions;
- Essential work
- Purchase food
- Purchase medication
Although the Prime Minister had previously warned the nation to stay home, many continued to ignore instructions. Last night’s announcement contained stricter rules, ordering for the cancellation of weddings and closure of non-essential stores.
The news has not instilled confidence in investors and has resulted in the decline of the GBP/EUR exchange rate. The lockdown will continue for three weeks and will come under review at Easter. Anyone seen to be violating these rules could face a fine.
As the UK remains on lockdown, some predict that the pound will endure a further slump. The lockdown has forced the closure of shops selling non-essential products. The closures mean that UK high streets will undoubtedly take a considerable hit, leaving the UK facing a possible recession.
Last week, the monthly Purchasing Managers’ Index, outlined that the UK economy is shrinking at a quarterly rate of 1.5-2.0%. These figures are likely to worsen amid the coronavirus lockdown, putting further pressure on the GBP/EUR exchange rate.
What are the latest currency movements for today and this week?
Demand for the euro continues to surge, showing its resilience in the global FX markets. The euro has outperformed its rivals, reaching a 1% gain against the Canadian dollar, yen and the euro to pound.
The only other safe-haven currency which has shown a fight against the euro is the US dollar. The two stand as the world’s most actively traded currencies. The EUR/USD traded nearly 0.7% higher this morning, at around USD 1.09.
The slip in the US dollar comes after the US Federal Reserve announced unlimited bond purchases last night. New measures from The Fed are an attempt to prevent the US economy from spiraling into a depression.
Another reason for fluctuation is that the US Senate is still in the process of reaching a deal concerning their coronavirus stimulus plan. The USD 2 trillion deal will help aid businesses battered by the coronavirus. The Democrats argued that aspects of the agreement did not adequately protect workers. The US Senate is hopeful that they can reach an agreement this evening.
How has the euro reacted to being called the epicentre of the coronavirus?
The World Health Organisation has labelled Europe as the epicentre of the coronavirus. After China, Italy is the most affected country to be hit by the virus. As the number of coronavirus cases in China began to fall, we continued to see rising numbers across Europe.
It is, therefore, surprising that the euro has performed in the way that it has, soaring against its rivals. Given Europe’s current climate, why is the euro so strong?
The strength in a currency can be down to several factors. Sometimes there may not even be an explanation. The markets can be unpredictable, and occasionally, results can be surprising and challenging to explain.
In the current case of the euro, we can attribute its performance to the fluctuation of its peers and their political climates. With the US, for example, we have seen the Federal Reserve cut rates at a rapid pace. This action has contributed to an unsteady pairing with the euro.
Similarly, with the pound, we saw the euro rise after Boris Johnson’s lockdown announcement. Much of a currency’s progression comes from the reaction to international affairs.