The pound euro exchange rate has been moving in the right direction creating some good opportunities to buy euros with pound compared to its recent low a fortnight ago. The pound sterling euro rate had hit the lower end of the 1.05 level before improving towards 1.13 on the Interbank level at the time of writing.
The euro has been struggling against sterling and has also started to fall vs the US dollar. According to one analyst Yohay Elam ‘Coronabonds are not just a new buzzword but are an essential tool to mitigate the economic fallout of coronavirus in the old continent.’ There is an issue between the countries within the Eurozone as to how the debt will be managed and shared between the nations. With 4 of the 6 countries mostly affected by the pandemic in Europe then the virus does not appear to be showing any sign of abating.
Clearly the market is reactive to what is happening with the global updates as to what is happening with the pandemic. Spain has recorded a record daily death toll of 864, meaning more than 9,000 people have died in the country as a result of coronavirus. Meanwhile, globally there have been a total of 800,000 cases recorded so far, which is clearly set to continue to rise.
Inflation Set to Fall and Impact on Euro Exchange Rates
In the Eurozone they are likely see a fall in the value of inflation and expectations are for inflation to fall to 0.7%. Typically a central bank would react to falling inflation by cutting interest rates or introduce further Quantitative Easing but with the recent action taken by the European Central Bank I cannot see much of a justification to add to the already enormous amount of QE adopted in the recent weeks. Therefore, this could possible have a detrimental effect on the value of the euro vs the pound and the US dollar. However, whilst inflation is predicted to fall in the Eurozone this clearly will not just be a factor that only affects the continent. Therefore, it will be important to see how inflation affects GBP EUR exchange rates this month.
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