GBP/EUR Exchange Rate Buoyed Following Dire Eurozone GDP Figures
The Pound to Euro (GBP/EUR) exchange rate is ticking higher this morning as preliminary figures from the Eurozone showed a dramatic drop in growth at the start of the year.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1505, up roughly 0.3% from this morning’s opening levels.
Euro (EUR) Undermined by Abysmal GDP Figures
The Euro (EUR) is on the back foot against the Pound (GBP) and the majority of its other peers this morning as markets react to the Eurozone’s latest GDP figures.
According to data published by the EU’s statistics agency, the Eurozone economy contracted a whopping 3.8% in the first quarter of 2020, plunging from the previous quarter’s 0.1% growth and fallen even further than economists had feared.
Euro area #GDP -3.8% in Q1 2020, -3.3% compared with Q1 2019: preliminary flash estimate from #Eurostat https://t.co/x17Ql1VD2U pic.twitter.com/1fNtPVZokS
— EU_Eurostat (@EU_Eurostat) April 30, 2020
This was a worst contraction of growth since records began in 1995 and comes after economic activity in the Eurozone screeched to a halt in March as most of the bloc went into lockdown.
Bert Colijn, Senior Eurozone Economist at ING, comments:
‘Historic. The first quarter decline in the eurozone economy is the worst for the economic bloc since at least the start of the 1970s. Almost all of the damage happened in the final two weeks of the quarter, showing how remarkably deep a contraction can become under mandated lockdowns.’
Economists are forecasting that things are likely to get even more dire in the second quarter, with the Eurozone set to fall into a recession for the first time since the Euro crisis.
Pound (GBP) Steady Ahead of PM’s Coronavirus Update
At the same time, the Pound (GBP) has found only limited support this morning as Boris Johnson prepares to update the UK on the ‘fight against [the coronavirus] and the steps we are taking to defeat it’.
This will be the Prime Minister’s first daily coronavirus briefing in almost a month after he was admitted to hospital due to complications from contracting the disease himself.
Johnson will likely address concerns over a shortage of PPE equipment for NHS workers as well as whether the government is any nearer to reaching its goal of 100,000 coronavirus tests a day.
However, for GBP investors the real focus will be on the PM’s update on the lockdown. Something which could leave them disappointed as observer’s suspect Johnson will indicate he still isn’t prepared to start easing restrictions.
GBP/EUR Exchange Rate Forecast: ECB Rate Decision in Spotlight
Still to come today is the European Central Bank’s (ECB) latest rate decision, which looks set to stir up some volatility in the Pound to Euro (GBP/EUR) exchange rate.
While the ECB is expected to leave interest rates unchanged, analysts suspect the bank will announce an expansion to its bond buying programme.
Despite repeated calls from ECB President Christine Lagarde for EU leaders to ramp up fiscal spending in order to support the Eurozone through the coronavirus crisis, resistance by Northern members has resulted in only a modest recovery package being agreed upon at last week’s EU summit.
This leaves the ECB as the only game in town, likely forcing Lagarde’s hand into increasing the bank’s stimulus measures.
However, this may benefit the Euro as EUR investors will be relieved that at least someone is ready to shoulder some responsibility.