- Pound Rally Impact
- Germany Stimulus Plan
- Improving economic activity
The EUR rallying to two-month highs could do little to prevent a sell-off of the EUR/GBP pair. The pair closed lower in Monday trading session as the British Pound remained resilient amidst a cloud of uncertainty in the British economy.
Eurozone economy recovery
The EUR/GBP was down by more than 0.97% in Monday trading session. The sell-off came at the backdrop of the British Pound racing to four-week highs against the greenback.
EUR strength looks set to curtail further downside action as traders remain cautiously optimistic about the Eurozone economy. The common currency is flying high against the U.S dollar as traders react to reports that the EU has succeeded in assembling a stimulus plan.
The much-needed stimulus plan should go along way in steering the embattled Eurozone economy that is reeling from the effects of the COVID-19 pandemic. Reports that Germany is preparing for the second phase of a €50 billion to €190 billion stimulus plan should continue to boost sentiments around the euro. In addition to stimulus packages, in recent weeks, manufacturing activity has been easing lockdown restrictions.
Many countries within the Eurozone have already started to reopen parts of their economies even as they continue to report cases of coronavirus infections. The IHS Markit’s Manufacturing Purchasing Managers Index recovering to 39.4 after plunging to 22-year lows of 33.4 all but affirms the fact that the Eurozone economy is on a recovery path.
British Pound Resilience
Improving economic activity at the back of stimulus packages should lead to a stronger euro, a development likely to send the EUR/GBP pair higher after a recent pullback. However, a rejuvenated pound could derail any gains in the short term.
The British Pound has remained resilient and continued to strengthen against the greenback as an expansion of U.K stimulus plans continues to offer support. The Pound is currently at four months high as it continues to play catch up to the euro when it comes to gains.