EUR GBP

EURGBP Currency pair flag

Latest EUR GBP Analysis and Forecasts

Riskier assets stay strong, as coronavirus fears ebb

  • As we highlighted in last week’s Macro Watch, global financial markets remain fully focused on the coronavirus.
  • Although markets remain on edge, the underlying theme of “risk on” continues to dominate, although punctuated by brief spells of “risk off” with quick, usually brief corrective moves.
  • This was best highlighted last week when during an erratic 24-36 hours for financial market assets, we saw a shift back to a “risk off” mode on Wednesday-Thursday after a leap in the coronavirus cases in the Hubei province, after a change in the counting methodology.
coronavirus
  • However, markets quickly shifted back to “risk on” mode, discounting the new methodology and then seeing the number of new cases falling into the ned of the week.
  • Global stock indices surged back to record/ multi-month/ multi-year highs with ebbing coronavirus fears as markets have discounted the threat as it is seen at the moment.
  • US averages hit new all-time highs alongside the German DAX, bolstered by a weaker Euro.
  • Whilst in the Forex space, the safe haven Japanese Yen remains weaker (USDJPY higher), whilst the commodity currencies, the Australian and New Zealand Dollars have continued their rebounds.
  • The New Zealand Dollar rally was bolstered by a less dovish, de facto more hawkish, Reserve Bank of New Zealand last Wednesday.
  • The Euro remain weak, with EURUSD hitting its lowest level since 2017, as European growth concerns, plus political worries in Germany and Italy have weighed on the pan-European currency.
eurusd chart
  • In the U.K. a Cabinet reshuffle ended with the surprise resignation of Chancellor Sajid Javid, which saw the Pound rally (GBPUSD higher, EURGBP lower) as it was seen opening the door to fiscal stimulus, making a rate cut from the Bank of England less likely.
gbpusd chart

Key this week

  • Monday is the Presidents’ Day Holiday in the U.S., markets are closed.
  • The geopolitical focus will stay on data regarding the spread of and deaths from the coronavirus.
  • Central Bank activity is focussed on Tuesday’s Reserve Bank of New Australia (RBA) meeting minutes, and on Wednesday we get the U.S. Federal Open Market Committee (FOMC) meeting minutes.
  • We also have Eurogroup/ Ecofin Meetings on Monday/ Tuesday respectively.
  • The macroeconomic data spotlight will be on U.K. Employment, Consumer Price Index (CPI) and Retail Sales, the German ZEW survey, Canadian CPI, the Australian Employment report and Global Markit Purchasing Manager Index (PMI) data. See the table below for timings.
Date Key Macroeconomic Events
17/02/20 Japanese GDP; Eurogroup Meeting; U.S. Presidents’ Day Holiday, markets closed
18/02/20 Ecofin Meeting; RBA meeting minutes; U.K. Employment report; German ZEW survey
19/02/20 U.K. CPI; Canadian CPI; FOMC meeting minutes
20/02/20 Australian Employment report; U.K. Retail Sales
21/02/20 Global Markit PMI data

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Other major currency pairs


BUY - rate is expected to increase, i.e. the first currency gains value against the second currency.
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EUR/GBP Live and Historical Rates

The EUR/GBP pair – also known as the Chunnel – is yet another pair made up of two major currencies, which does not itself qualify as a major. The Chunnel is obviously massively influenced by the close correlation of the EU and British economies, and that will likely remain the case after Brexit too. The chart above shows how many GBPs one needs to purchase a EUR.  

The EUR

Used by 21 countries and some 324 million people as official currency, the EUR is the common currency of the world’s biggest economy, the Eurozone. While 7 EU members are bound by treaty to join in the future, in the wake of the 2008 global financial crisis, the appetite on the part of these countries to join the Euro club has quite noticeably subsided. Still, the Euro is used de-facto by at least as many people as the population of the Eurozone, and the currency is the second most traded, as well as the second biggest reserve currency of the world.

The GBP

The British Pound is a high-profile currency as well. In addition to being the world’s oldest currency still in use today, it is the 4th most traded one and the third largest reserve currency behind the USD and the EUR. Viewed by many as a symbol and guarantor of British sovereignty, the GBP was only allowed to float in 1971. During its EU membership, Britain refused to surrender its currency and join the Euro and now with the Brexit procedure launched, the future of the GBP seems assured.

EURGBP Analysis

Due to the close economic interdependence between Britain and the EU (a status-quo likely to survive the impending Brexit too), the GBP and the EUR are quite closely aligned. Carry trading isn’t a profitable option on this pair, due to the small interest rate spread between the currencies.

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