The Pound to Euro (GBP/EUR) exchange rate pushed higher this morning as investors and markets alike await the UK Spring Budget later today.
At the time of writing the pair are currently trading at around 1.1563.
Pound (GBP) Supported by Extended Furlough Scheme
Whilst Pound investors await the UK Budget this afternoon from Chancellor Rishi Sunak, Sterling has already found support from the announcement of the furlough scheme being extended until September and the Self-Employment Income Support Scheme.
Announced last night, just a day before the budget, Chancellor Rishi Sunak said:
‘Our Covid support schemes have been a lifeline to millions, protecting jobs and incomes across the UK. There’s now [a] light at the end of the tunnel with a roadmap for reopening, so it’s only right that we continue to help business and individuals through the challenging months ahead – and beyond.’
Furthermore, a fourth grant from the Self-Employment Income Support Scheme has been made available to claim from April.
Sunak had previously been criticised for not supporting those who had recently becoming self-employed at the start of the pandemic.
The prospect of tax rises in the spring budget has caused concern from some MP’s in the Conservative Government, though Paul Johnson, director of the Institute for Fiscal Studies (IFS) commented:
‘I expect, some tax rises, but not this year – in the next two or three years.’
Furthermore, the UK services PMI – was more-or-less as expected and showed the UK economy stabilised after January’s sharp contraction.
Euro (EUR) Down as Eurozone Composite PMI Remains in Contraction
Whilst Euro markets also await the UK budget this afternoon, the currency was down this morning as despite beating forecasts the Eurozone Composite PMI remained in contraction for the fourth consecutive month.
The IHS Markit Eurozone Composite PMI came in at 48.8 in February 2021, compared with 47.8 in the previous month.
Chris Williamson, Chief Business Economist at HIS Markit commented on the release:
‘A fourth successive monthly drop in business activity puts the Eurozone economy on course for a double-dip recession, though an easing in the rate of decline underscores how the latest downturn appears far less severe than the initial hit from the pandemic last year.’
Furthermore the Eurozone’s largest economy, Germany, had its own Services PMI revised lower for February with a reading of 45.7 being the fifth consecutive month of contraction in the sector, and the steepest since May of 2020.
Pound to Euro Outlook: Chancellor Rishi Sunak in Focus
All eyes await the UK Budget this afternoon, Pound investors will be looking towards any further hawkish commentary from the Chancellor surrounding the recovery of the UK’s economy.
Euro investors will themselves be looking towards the release of Eurozone retail sales and unemployment data for January tomorrow.
Retail sales in the Eurozone are expected to be down at -1.2% year-on-year amid lockdown restrictions across the bloc which could add further pressure to the single currency.
The unemployment rate in the Eurozone is also expected to have increased modestly throughout January, another stark reminder that the Eurozone continues to struggle against its coronavirus situation.