GBP/EUR Exchange Rate Muted in Wake of German GDP Release
The Pound to Euro (GBP/EUR) exchange rate is trading in a narrow range this morning, as Germany’s full-year GDP figures confirmed Europe’s largest economy suffered a sharp contraction in 2020.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1246, virtually unchanged from this morning’s opening levels.
Euro (EUR) Rangebound Following German GDP Figures
The Euro (EUR) is struggling for direction this morning, following the publication of Germany’s full-year GDP figures.
These confirmed that unsurprisingly the German economy shrank in 2020 as economic activity was undermined by the coronavirus pandemic, with growth shrinking by 5% against forecasts of a 5.1% contraction.
While this was the country’s worst economic performance since 2009, analysts suggest that Germany is likely to have fared much better last year than most of its European peers, thanks in part to its expansive manufacturing sector, which wasn’t subject to the same shutdowns as the service sector.
EUR investors also appear reluctant to make any aggressive bets on the Euro ahead of this weekend, as Chancellor Angela Merkel’s Christian Democratic Union party chooses who will succeed Merkel as the next party leader, and potentially take the helm of Europe’s largest economy when Merkel steps down at the next election in September.
EUR investors are likely to favour a candidate which is likely to continue Merkel’s centrist approach, such as Armin Laschet, the governor of Germany’s most populous state, North Rhine-Westphalia.
Pound (GBP) Firms on Coronavirus Hopes
At the same time, the Pound (GBP), is beginning to tick higher this morning amidst tentative signs that the UK may have passed the peak of its second wave of coronavirus cases.
The number of new daily cases has now fallen for the past couple of days, with the latest figures reporting a rise of 47,525 down from a peak of over 60,000 earlier in the week.
The UK’s progress with its vaccination programme, with 4.5% of the population now vaccinated, is also reason for cheer for GBP investors as in increases the odds of the government easing the lockdown soon rather than later.
However, tempering the upside in Sterling are concerns over the current strain on the NHS, which could still force the government to impose stricter lockdown measures.
GBP/EUR Exchange Rate Forecast: Sterling to be Undermined by Gloomy GDP Reading?
Looking ahead, the Pound to Euro (GBP/EUR) exchange rate could face some pressure at the end of this week with the publication of the UK’s latest monthly GDP figures.
November’s release is expected to report a sizable contraction of economic growth due to the lockdown measures in place at the time, with Sterling vulnerable to additional pressure if the slump in growth proves to be even larger than expected.
Meanwhile, in the absence of any notable Eurozone data releases, the focus for EUR investors on Friday is likely to be on European coronavirus headlines.]
This may see demand for the single currency curtailed by concerns over rising cases in many EU countries particularly as the more-infections strain from the UK appears to be becoming increasingly prevalent on the continent.