GBP/EUR Exchange Rate Rangebound as UK and EU Find Consensus on Fishing Rights
The Pound to Euro (GBP/EUR) exchange rate held steady this morning, with the pairing currently fluctuating around €1.09.
Sterling benefited from this morning’s release of the latest UK GDP data for the third quarter, which was upwardly revised to 16%.
Analysts at Reuters commented:
‘Britain’s economic recovery from its coronavirus crash was quicker than expected in the third quarter, […] which again showed government borrowing soaring to pay for the coronavirus crisis.’
Today also saw the latest public finances gauge for November, which saw the public sector net borrowing figure hit £31.6 billion – a 50-year high.
However, GBP investors are becoming more concerned about Britain’s economy as Prime Minister Boris Johnson aces increasing pressure to impose another national lockdown.
With the UK facing a new strain of Covid-19, UK markets are becoming concerned that the faster transmission rate could further merit more draconian restrictions in the months ahead.
Sir Patrick Vallance, Chief Scientific Advisor to the Government, explains:
‘I think it is likely that this will grow in numbers of the variant across the country, and I think it’s likely therefore that measures will need to be increased in some places in due course, not reduced.’
Meanwhile, Brexit developments have taken a relatively positive turn, with the UK and EU closing in on a compromise over fishing rights.
Euro (EUR) Steady as German Consumer Confidence Dips in January
The Euro (EUR) held steady today following the release of January’s German Consumer Confidence Survey, which fell by -7.3.
However, with Germany facing strict lockdowns to stem the spread of Covid-19, the outlook for the Eurozone’s largest economy appears increasingly grim.
Rolf Buerkl, a consumer expert at GfK commented:
‘As a result, stricter measures are unavoidable, and this will lead to further uncertainty.’
‘With the hard lockdown and the closure of most stores, the consumer climate is faced with yet another setback.’
EUR traders are becoming more hopeful, however, after Europe approved the Pfizer/BioNTech Covid-19 vaccine to be rolled out across Europe in the next few days.
Emer Cooke, the head of the European Medicines Agency (EMA), commented:
‘Our scientific opinion paves the way for the first marketing authorisation in the EU. It is a significant step forward in the fight against this pandemic that is causing suffering and hardship.’
GBP/EUR Outlook: Covid-19 Developments and Brexit to Remain in Focus This Week
Pound (GBP) investors will continue to monitor the UK’s Covid-19 situation and Brexit developments throughout the course of this week.
Any signs of rising coronavirus cases owning to the new ‘mutation’ would be GBP-negative.
Any indications that the UK could be leaving the EU with a deal would, too, drag down the GBP/EUR exchange rate.
The Euro (EUR) could head higher this week if Europe’s rollout of the Covid-19 vaccine improves the outlook for the Eurozone’s economy for 2021.