Pound to Euro Exchange Rate Forecast: Will the Pound to Euro Rate Fall Any Further?

Pound to Euro Under Pressure; When Will this Improve?

Pound to euro exchange rates staged a solid recovery last week, having bounced back off the 1.0533 lows seen in the previous week. A rebound in confidence relating to the outlook ahead from the Coronavirus helped the pound to make some inroads against the single currency.

Last week, the rout appeared to be taking off again near the beginning of the week but by Wednesday the GBPEUR interbank rate was back over 1.10. Much of the reversal of sentiment has been linked to the response not just by the UK Government to pay wages, but also by the strong response in the United States with a $2 trillion dollar package for the US economy, which has helped to raise sentiment generally.

Has the Pound to Euro Exchange Rate Bottomed Out?

With the COVID-19 pandemic perhaps just in its infancy, the potential for further uncertainty and woes ahead exists. Flash surveys last week for both the Eurozone and UK economy pointed to a ‘collapse’ in economic sentiment by purchasing managers of leading businesses, with closely watched PMI surveys for both areas posting sharp declines.

Economic data will provide a spotlight on how well the two economies are responding to the recent measures to limit economic activity, including a lockdown across much of Europe and the UK. With populations less economically active because of this, it seems fair to suggest there is potential for further negative news ahead.

What Could Affect GBPEUR Rates this Week?

This week is the beginning of a new week and from Wednesday April 1st we see the latest economic data for March released. This will present a fresh set of information for the markets to better understand how the virus is influencing output, the figures are based on the flash surveys above, not expected to be good news.

It can be argued that pound to euro rates might fall because of the tough times ahead for the UK. However, the euro is not immune from the harm too. Interestingly, it does appear the euro which has been the better performer of the two currencies in recent weeks, despite the wider concerns for the Italian economy and debt levels.

The euro is also stronger because it has been used as a funding currency in recent years because of its ultra-low interest rates. That saw investors borrowing in euros and investing in other higher yielding and risky investments and currencies around the world. With the Coronvirus denting global confidence many of these investments have been sold off and the euro loans repaid, triggering a rise in the euro.

GBPEUR interbank rates reached 1.12 towards the end of last week, and this week will provide some key news as to whether or not this was the beginning of a new trend higher or a just a temporary rebound following the bigger moves lower in recent weeks.

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