Boris Johnson’s Covid-19 Worries Push Pound Sterling Euro (GBP/EUR) Exchange Rate Lower
After Boris Johnson’s admission to intensive care the Pound Sterling to Euro (GBP/EUR) exchange rate came under renewed pressure.
While subsequent updates suggest that Johnson’s condition is stable this failed to offer Pound Sterling (GBP) any particular support.
The prospect of political disruption weighed heavily on GBP exchange rates this morning as worries over the Covid-19 crisis picked back up.
As the fourth quarter UK labour productivity index confirmed a lacklustre level of productivity growth this added to doubts over the health of the economic outlook in the face of the current pandemic.
Positive German Industrial Production Shores up EUR Exchange Rates
The Euro (EUR), meanwhile, found some support on the back of a better-than-expected month of German industrial production.
Although forecasts had pointed towards a fresh monthly contraction in February the data instead showed a modest 0.3% uptick, suggesting a greater level of resilience within the manufacturing sector.
While this positive performance looks set to be overshadowed by a subsequent decline in March, driven by the fallout of Covid-19, the figure still offered EUR exchange rates a temporary boost.
Unexpectedly strong Italian retail sales figures for February also helped to keep a floor under the single currency, in spite of lingering concerns over the outlook of the Eurozone.
Underwhelming German Trade Figures Set to Weigh on Euro Appeal
Demand for the Euro could easily fall back on Thursday, however, if February’s set of German trade data fails to impress.
Fresh evidence of a slowdown in trade for the Eurozone’s powerhouse economy may leave EUR exchange rates biased to the downside.
A monthly contraction in export volumes could weigh particularly heavily on the single currency, given the deterioration in global trade seen in subsequent weeks.
As long as signs point towards the German economy coming under greater pressure even ahead of the major impact of Covid-19 the appeal of the Euro is likely to weaken.
Unless the trade surplus shows a widening on the month the GBP/EUR exchange rate could return to a stronger footing.
Pound Vulnerable Ahead of Monthly UK Gross Domestic Product Reading
Worries over the health of the UK economy could see a resurgence on Thursday, though, with the release of February’s monthly gross domestic product reading.
After the stagnation seen in January investors hope to see a modest 0.1% uptick in the monthly growth rate.
Even if growth shows signs of picking back up, however, this may not be enough to keep the Pound from trending lower across the board.
With the economy looking set to suffer a major slowdown in March anything short of a major upside surprise here is unlikely to alter the odds of a sharp first quarter growth contraction.
Fresh declines in manufacturing and industrial production could also put a dampener on GBP exchange rates, particularly if anxiety over the health of the prime minister persists.