EUR / GBP returns to 0.9000 with the pound on the defensive

• EUR / GBP rises 1% on the day to move back towards the 0.90000 zone.
• The pound sinks on concerns over COVID-19 and Brexit.
• A weaker than expected GDP has added concerns about the UK’s economic outlook.

The euro is going through a remarkable comeback against a libra weakened on Thursday, appreciating more than 1% on the day to regain most of the ground lost earlier this week and returning to the 0.9000 area.

COVID-19 and Brexit hurt the pound

The pound is depreciating across the board on Thursday, hit by a combination of the dramatic expansion of the coronavirus pandemic in the UK, stalled Brexit negotiations and pessimistic macroeconomic data.

The UK was the first European country to reach 50,000 deaths from COVID-19, according to official figures released by the British government on Wednesday. These numbers have given up hope for a vaccine that anticipates disastrous economic consequences.

Beyond that, Brexit negotiations remain stalled and most likely falling short of the mid-November target for a deal. Comments of “significant differences” and warnings about the possibility of the talks falling apart from negotiators are deterring confidence in a last-minute deal that would prevent a disorderly exit from the Union.

On the macro front, preliminary UK Gross Domestic Product has failed to brighten spirits. The UK economy expanded at a 15.5% year-on-year rate in the third quarter, disappointing market expectations of a 15.8% increase. However, the main problem has been the poor monthly reading of GDP, which has shown an increase of 1.1% in September, compared to the 1.5% expected, a quite negative figure if we take into account that the data has been taken before the start of the second lock.