Pound Euro Exchange Rate Climbs on Services PMI and Lockdown Lifting Plans

Pound Euro Exchange Rate Continues to Trend Upwards

(Updated 16:40, 5/7/21) The Pound Euro (GBP/EUR) exchange rate has continued to climb this afternoon, with Boris Johnson expected to announce the government’s plans to press ahead with lifting most lockdown restrictions on 19 July at 17:00.

In addition, a small uptick in the US Dollar (USD) may have also lent support to the Pound Euro pairing, due to the single currency’s negative correlation to the ‘Greenback’.

Original article continues below:

Pound Euro Exchange Rate Firms on Reopening Optimism

The Pound Euro (GBP/EUR) exchange rate has strengthened today, with reopening optimism and better-than-expected data supporting Sterling.

The Eurozone also published strong PMI figures but has been undermined by concerns over the spread of the Delta coronavirus variant.

Pound (GBP) Climbs as UK Set to Fully Reopen

The Pound Euro exchange rate made some gains this morning amid reports that Boris Johnson is set to confirm the 19 July lifting of the final lockdown restrictions.

With over 50% of the UK population fully vaccinated, and the vaccine programme still advancing, the UK remains on track to fully reopen its economy in two weeks’ time. This optimistic outlook has supported Sterling, which gained some ground this morning.

However, the upside may be capped by concerns that allowing high rates of transmission may enable the virus to mutate into new variants, including vaccine-resistant strains.

Professor Susan Michie, a member of Sage’s behavioural science subcommittee, tweeted her concerns:

Also supporting the Pound this morning was the UK’s services PMI, which printed at 62.4, above forecasts of 61.7. The results show that the UK’s service sector continues to expand as more restrictions are lifted and the UK economy recovers.

Euro (EUR) Subdued Despite Positive PMIs

The Euro (EUR) remained muted against the Pound at the start of today’s session, despite some positive services PMIs from Europe.

While Germany’s PMI came in slightly below expectations, it still increased on the previous month’s figures to show that German service-sector activity continues to expand.

The Eurozone’s PMI, however, printed above expectations at 58.3 – the steepest pace of expansion since July 2007 – indicating that the European economy is rapidly recovering.

In spite of this, the Euro has struggled to gain ground against Sterling. One factor could be rising cases of the Delta variant across the European continent, with some scientists worried that a fourth wave may be imminent.

The World Health Organisation has warned that the risk of a new wave is growing, with the ongoing Euro 2020 potentially acting as a ‘super-spreader’, and France’s health minister has also raised concerns that another wave may come in the near future.

Pound Euro Exchange Rate Forecast: Coronavirus News could Weigh on Both Currencies

The Pound Euro exchange rate could relinquish some of the morning’s gains today, as markets digest the strong services PMIs.

In addition, coronavirus concerns may weigh on both currencies as the day goes on.

Ahead of Boris Johnson’s address today, many are urging for caution in the coming weeks. The Unite union has called the plans to lift the requirement to wear face coverings on public transport an ‘act of gross negligence’, while UK scientists are worried about new variants emerging.

On the other hand, rising cases across Europe may fuel fears that disruptions to tourism could impact the Eurozone’s economic recovery.

Both GBP and EUR investors will be keeping an eye on the headlines.