GBP/EUR Exchange Rate Rises as UK Prepares to Ease Lockdown Restrictions
The Pound to Euro exchange rate rose by 0.3% today as optimism continues to grow about the UK’s economic prospects following Prime Minister Boris Johnson’s announcement of a lockdown exit plan.
The pairing is currently trading around €1.16.
Michael Hewson, an analyst at CMC Markets, commented:
‘The Pound has continued its advance … as markets take the not unreasonable view, barring some serious missteps from the government, that the UK economy will probably be one of the first major economies to start to ease restrictions in the coming weeks.’
As a result, GBP investors are now more confident than before that the UK economy could begin to seriously recover in the months ahead.
However, some Pound investors are remaining cautious as a new Covid-19 variant could disrupt the effectiveness of the vaccine rollout programme.
Today will also see the Bank of England (BoE)’s Monetary Policy Report Hearings.
Any further bullishness about the outlook for the UK’s economy, however, could further buoy the GBP/EUR exchange rate.
Euro (EUR) Struggles as Outlook for German Economy Dims Following Latest GDP Data
The Euro struggled today following the publication of Germany’s GDP data for the fourth quarter. The figure was revised upwards by 0.3%.
Carssten Brzeski, an analyst at ING, was downbeat in his analysis, commenting:
‘In sum, the construction sector, industrial activity and foreign demand helped to stop the German economy from falling into contraction during the second lockdown.
‘The downside to these factors, however, is that it is very unlikely they will again prove to be strong insurance against contraction in the fourth quarter. Instead, the stricter lockdown measures since mid-December, the harsh winter weather in February, a reversal of any pre-Brexit hoarding in the UK and weaker foreign demand at least from other eurozone countries have increased the risk of an unwelcome rotation. The growth drivers of the fourth quarter could easily become drags in the first.’
As a result, EUR investors are remaining cautious with their outlook for the Eurozone economy, with the Germany economy – the largest in the bloc – continuing to suffer because of extended periods of lockdown.
GBP/EUR Exchange Rate Forecast: Could Downbeat German Consumer Confidence Drag Down the Single Currency?
Euro traders will be awaiting tomorrow’s release of the German GfK Consumer Confidence Survey for March.
Any marked improvement in the outlook for the Eurozone’s largest economy would be EUR-positive.
However, with the European Union’s slow Covid-19 vaccine rollout programme likely to drag on the bloc’s economic recovery for some time, the single currency will likely remain subdued.
Tomorrow will also see a speech from the European Central Bank’s (ECB) Executive Board Member Philip Lane.
If he is notably downbeat in his assessment of the Eurozone’s economy going forward, then the EUR/GBP exchange rate will suffer.
The GBP/EUR exchange rate could continue to head higher this week, however, as the outlook for the UK’s economy continues to improve as Covid-19 cases fall and the vaccine rollout steams ahead.