Eurozone COVID Cases Rise, EURGBP Starting to Drift

Eurozone COVID Cases Rise, EURGBP Starting to Drift

Euro exchange rates have lost ground against a number of major currencies over the course of the trading week, with EURGBP notably dropping to the lowest levels seen in over 5 weeks.

EURGBP interbank exchange rate levels are currently sat in and around the 0.89 (1.1235) level at the time of writing this report, and this drop of in the value of euro does seem to be partially down to the rise in COVID-19 cases in and around the Eurozone, sparking fears of more lockdowns on the horizon and grinding the tourism industry to a halt, which is not good news for a number of economies within the Eurozone that really do rely on this income.

Portugal, Spain, Italy Greece and France have all seen cases creeping up, leading to quarantine measures put in place in various areas around the world and thus substantially lowering the number of visitors to those regions right in what would usually be the busiest time of the year, and would bring in the most revenue.

Portugal, Italy, Greece and Spain were all part of the less economically successful members of Europe along with Ireland a few years ago, with all of these economies hitting a real downturn and requiring assistance to get back on the right track again.

Not only would these economies have suffered a huge drop in Gross Domestic Product data (GDP/ growth figures), but there are extremely reliant on tourism and with the possible further potential of an already dripping tap being turned off, it is no surprise to see investors and speculators alike keeping the euro at arm’s length for the time being, lowering demand and making it slightly weaker.

There is no secret that USD has fallen out of favour, with COVID-19 and the uncertainty of an election hanging over the head of the States investors are looking for another base, which can quite often cause a flow into euro, but with the current concerns around a second wave within the Eurozone we are seeing this money move into other areas.

Currently, there is also the added element of ongoing Brexit talks, which brings more uncertainty to the euro and a possible opportunity with the pound. Should there be a deal agreed between the U.K and EU in the coming weeks then there may be Sterling strength seen, so the pound may be seen as undervalued in many traders eyes.

Of course there is always the potential banana skin of Brexit talks falling through and the EURGBP rate gaining quite a lot of ground as it would be likely that Sterling may fall due to fears of a no deal Brexit, which has historically sunk the value of the pound against all major currencies.

Economic data this week has actually been OK for the Eurozone, however this data has not managed to make its way through to any significant strength in euro exchange rates, as an example we saw unemployment figures for the Eurozone as a whole sitting at 7.9% against analysts expectations of 8% so there was a slight improvement there.

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