GBP/EUR Exchange Rate Flat as Sunak to Discuss Future of Government’s Furlough Policy
The Pound to Euro (GBP/EUR) exchange rate is rangebound this morning as markets await UK Chancellor Rishi Sunak’s update on the government’s coronavirus job retention scheme.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1405, virtually unchanged from this morning’s opening levels.
Pound (GBP) as UK Chancellor to Outline Future of Furlough Scheme
The Pound (GBP) is trading in a narrow range against the Euro (EUR) this morning as markets wait for Chancellor Rishi Sunak to discuss the future of his coronavirus furlough policy.
As part of the Chancellor’s plan to save jobs during the coronavirus crisis, the government is currently covering 80% of the wages of more than six million people.
Initially due to conclude at the end of May, the scheme has been extended through June.
But with the UK lockdown still firmly in place and many businesses not expected to start reopening until July at the very earliest, groups have urged Sunak to extend the coronavirus wage subsidy scheme until at least September.
Extend furlough scheme or face spiralling job losses, Rishi Sunak told https://t.co/M4N1El1rto
— Guardian news (@guardiannews) May 11, 2020
Adam Marshall, the director general of the British Chambers of Commerce, said:
‘Firms will need to know that government support schemes, which have helped save millions of jobs in recent weeks, will continue for as long as they are needed so that they can plan ahead with confidence.’
However, the Chancellor has warned the furlough policy is not ‘sustainable’ in its current form and is expected to announce a gradual wind-down of the scheme, with options including reducing payments to 60% of wages.
Expect the Pound to face some pressure this evening should the Chancellor announce anything which GBP investors believe could put UK jobs at risk.
Euro (EUR) Muted amidst Concerns for a Second Wave of Coronavirus Infections
At the same time, the Euro (EUR) is struggling to find support this morning, in response to fears that Europe could be facing a second wave of coronavirus infections as countries begin to open back up.
This comes as the R-rate –marking the rate at which the coronavirus spreads- has risen to 1.07 in Germany.
The resurgence of the diseases casts doubts over the reopening of the Eurozone and could lead to the reintroduction of lockdown measures if cases spike to quickly.
GBP/EUR Exchange Rate Forecast: All Eyes on UK GDP
Looking ahead, the Pound to Euro (GBP/EUR) exchange rate faces some likely headwinds on Wednesday with the publication of the UK’s latest GDP estimate.
Economist forecast tomorrow’s data will reveal the UK suffered a significant slump in growth in the first quarter, with GDP predicted to have plunged from 0% to –2.5%, the largest drop since the 1970s.
This of course is likely to reflect poorly on Sterling, and may see the GBP/EUR exchange rate retreat to a one-week low.
Meanwhile, EUR investors will be focused on the publication of the Eurozone’s industrial production figures. Will a record drop in factory output limit any potential upside in the Euro tomorrow?