Home Forex News EUR/GBP Slumps to 2-Months Lows amidst Economic Recession Concerns

EUR/GBP Slumps to 2-Months Lows amidst Economic Recession Concerns


The EUR/GBP pair continues to edge lower amidst growing weakness on the EUR. The EUR currency remains under immense pressure, as traders continue to question the health of the European Union economy. A confirmation that Eurozone factories suffered their biggest crash on manufacturing output plunging to record lows in April is the latest headwind, raising serious concerns.

Economic Recession Fears

As it stands, the Eurozone is experiencing a breathtaking crash in the wake of COVID-19 taking a toll on economic activity over the past two months. Investor sentiments have plunged to record lows of -41.8 below expectations of -33.5. A drop in investor’s sentiments amidst looming economic recession could explain why the EURO is losing ground against other major currencies.

European Central Bank governing council member warning that Germany is grappling with severe economic recession should continue to weigh in on the EUR strength. Compounding the weakness is Germany’s constitutional court ruling that the ECB must prove why it needs to continue purchasing government bonds.

Pound Bounce Back

The British Pound, on the other hand, continues to gain ground against the Euro amidst renewed optimism that the kingdom is on the right track in the fight against the COVID-19 pandemic. A confirmation that the government is working on modalities to get employers back to work has also worked in favor of the Pound strength.

The British economy has also come to a standstill in recent weeks as the fight against COVID-19 triggered lockdown as well as social distancing policies. The country’s scientific advisory group has since recommended the easing of lockdown measures gradually to boost economic activities.

EUR/GBP Price Analysis

The EUR/GBP has since slumped to two months lows of 0.8720, having turned bearish in March. A breach of the 0.8620 support level would leave the pair vulnerable to further drops back to the sub 0.8500 level.

The release of the European Commission Economic Growth Forecast is one of the developments that could weigh in on the EUR strength going forward. Traders are also awaiting the release of the Eurozone Markit PMI Composite for April. The release of the Bank of England monetary policy report could also weigh in on the pair.


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