Pound Euro Exchange Rate Steady as UK Unemployment Rate Falls for First Time During Covid-19 Crisis

GBP/EUR Exchange Rate Rangebound as UK Vaccine Success Buoys Confidence in UK Markets

The Pound Euro (GBP/EUR) exchange rate held steady this morning following the publication of the latest UK ILO Unemployment Rate report, which fell below forecasts and rose by 5% instead of the forecast 5.2% increase. The pairing is currently fluctuating around €1.16.

Sterling held steady against the Euro as UK unemployment has fallen for the first time in the coronavirus pandemic.

Consequently, this has provided a boost to UK market sentiment, with confidence growing in the outlook for the nation’s economic recovery in the months ahead.

Suren Thiru, the head of economics at the British Chambers of Commerce, was more cautious, however, expected joblessness to increase until the economy’s reopening:

‘Extending furlough will limit the peak in job losses. However, with many firms struggling with the damage done to their cashflow by a year of Covid restrictions, unemployment is likely to remain on an upward trajectory until well beyond a full reopening of the economy.’

The continued success of the UK’s Covid-19 vaccine rollout has also stabilised the Pound Euro exchange rate.

Euro (EUR) Struggles as the EU Faces a Third-Wave of Covid-19 Cases

The Euro is beginning to struggle as European lockdown concerns are weighing on confidence in the Eurozone’s economic recovery going forward into 2021.

Jeffrey Halley, senior market analyst at OANDA, explains why the Euro Pound exchange rate is rangebound, highlighting the tensions between the UK and the EU over vaccine exports as limiting both currencies:

‘The vaccine spat is negative for European and UK asset markets this week.

‘Europe is also contending with spiking Covid-19 cases and reimposing or extending lockdowns across major European economies. That has been felt most keenly in oil markets, with reassessments of future consumption taking place.’

As a result, EUR investors are becoming concerned that the EU could face a serious third-wave of coronavirus infections, which would further derail the Eurozone’s economic recovery.

There are no notable Eurozone economic data releases today, with single currency investors instead focusing on the EU’s growing Covid-19 crisis.

Pound Euro Forecast: Could Weak Eurozone PMIs Drag Down the Single Currency?

Euro traders are awaiting tomorrow’s publication of the flash Eurozone Composite PMI data for March. Any signs of deterioration in the Eurozone’s economy this month would strengthen the Pound Euro exchange rate as investors become more cautious of the single currency.

Tomorrow will also see a speech from the European Central Bank’s (ECB) President Christine Lagarde.

If she reiterates her concerns about the Eurozone’s economy and the EU’s Covid-19 vaccine rollout, then the EUR/GBP exchange rate would suffer.

Pound traders will be eyeing tomorrow’s publication of February’s UK Consumer Price Index. Any improvement in the outlook for the UK economy, however, would drive Sterling higher.

The Pound Euro exchange rate could head higher this week if the outlook for the UK’s economy and Covid-19 situation improves.

David Moore

Contact David Moore