GBP/EUR Exchange Rate Falls Despite Growing Confidence in the UK Economy
The Pound Euro exchange rate fell this morning despite Prime Minister Boris Johnson further confirmed that the lockdown would ease on 17 May in England. At the time of writing, the pairing is currently trading around €1.16.
Sterling dipped the single currency after the PM said that social distancing could be left up to ‘personal choice’ as early as next month. Instead, strong Eurozone economic data has driven down the GBP/EUR exchange rate from its strong start at the beginning of this week.
Johnson said that we had now entered the penultimate stage in the roadmap to further restrictions and a return to relative normality.
The PM said that easing lockdown was a ‘step towards that moment when we learn to live responsibly with Covid’.
However, the Scientific Advisory Group for Emergencies (SAGE) warned that with fewer lockdown measures in place, new variants could cause a major issue. SAGE explains:
‘A variant which either substantially escapes immunity or is highly transmissible (more so than B117 [the Kent variant]) could lead to a very significant wave of infections, potentially larger than that seen in January 2021 if there were no interventions.’
Pound (GBP) traders will be awaiting this afternoon’s speech from the Bank of England (BoE) Governor Andrew Bailey.
Any upbeat comments about the outlook for the UK economy would boost the Pound Euro exchange rate.
Euro (EUR) Exchange Rate Edges Higher as German ZEW Economic Sentiment Index Beats Forecasts for May
The Euro (EUR) edged higher against Sterling following the publication of the latest German ZEW economic sentiment index for May, which beat forecasts and rose to 84.4.
ZEW President Professor Achim Wambach commented on the data:
‘The slowing down of the third COVID-19 wave has made financial market experts even more optimistic. The ZEW Indicator of Economic Sentiment in the May survey has reached its highest level in more than 20 years. The assessment of the economic situation has also improved noticeably. The experts expect a significant economic upswing in the coming six months. The economic outlook for the euro area and the United States has improved considerably as well.’
The Eurozone’s latest ZEW survey of economic sentiment also rose to 84, exceeding forecasts of 71.2 and buoying confidence in the bloc’s economy.
As a result, the EUR/GBP exchange rate clawed back some of its losses earlier this week as the outlook for the Eurozone’s economy continues to improve.
GBP/EUR Exchange Rate Outlook: UK GDP Data in Focus
Pound (GBP) investors will await tomorrow’s release of the flash GDP data for March. If this continues to show a rosy outlook for the UK economy this year, then the Pound Euro exchange rate would head higher.
Tomorrow will also see the release of the latest UK manufacturing and industrial production gauge for March. Any signs of improvement would also be GBP-positive.
Euro (EUR) traders will be keeping a close eye on the latest Eurozone industrial production figure for March, which is expected to rise by 0.7%.
The Pound Euro exchange rate could continue to fall this week, however, if the outlook for the Eurozone’s economy improves.