GBP/EUR Exchange Rate Rangebound, UK Faces Labour Shortage
(Updated: 02/09/2021 16:49) The Pound Euro (GBP/EUR) exchange rate held steady this afternoon despite reports that food and drinks exports had suffered since Brexit, with trade sliding to the European Union (EU). The pairing is currently trading around €1.16.
Dominic Goudie, head of international trade at the FDF, commented:
‘At the same time, we are seeing labour shortages across the UK’s farm-to-fork food and drink supply chain, resulting in empty spaces on UK shop shelves, disruptions to deliveries and decreased production.
‘Unless steps are taken to address these issues, the ability of businesses to fulfil vital export orders will be impacted.’
As a result, Pound traders have become increasingly pessimistic about the outlook for the UK’s economic recovery.
Meanwhile, the Euro (EUR) has continued to rise thanks to encouraging Eurozone employment data, which is expected to result in a more hawkish tone from the European Central Bank (ECB).
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GBP/EUR Exchange Rate Rangebound, UK High Street Footfall Increases
The Pound Euro (GBP/EUR) exchange rate held steady this morning following news that Britons holidaying had given the UK high street a significant boost, according to the retail tracking company, Springboard. The pairing is currently fluctuating around €1.16.
As a result, some Sterling traders have become more optimistic about the UK economy. But fears of staff shortages in the next few months has held back the GBP/EUR exchange rate.
Diane Wehrle, Springboard’s marketing and insights director, commented on the report:
‘Despite restrictions being lifted for overseas travel, it is clear that Brits chose to stay home for the summer, which gave a welcome boost to high streets – and particularly those that are attractive visitor destinations such as coastal and historic towns.
‘In large cities outside of the capital, the improvement in footfall in August was nearly double that in smaller high streets, putting them at a comparable level versus 2019 for the first time.’
Despite UK business confidence being at a four-year high, concerns about rising Covid-19 infections and hospitalisations throughout autumn have dampened overall economic confidence.
Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, said:
‘[A]s the economy moves back towards pre-pandemic levels we can be optimistic that the momentum for business confidence and economic optimism can be sustained in the months ahead.’
In the absence of any notable UK economic data today, Pound traders will continue to monitor coronavirus developments. Could an uptick in daily infection rates drag down the GBP/EUR exchange rate?
Euro (EUR) Exchange Rate Benefits from Falling Eurozone Unemployment
The Euro (EUR) benefited yesterday from a drop in the Eurozone’s unemployment rate in July. Joblessness fell from June’s 7.8% to 7.6%.
Bert Colijn, senior economist for the Eurozone at ING, also commented:
‘The Eurozone unemployment rate decreased to 7.6% in July. This is down from 8.2% in April as the monthly pace of reduction has been 0.2ppt a month since then. That rapid decline in unemployment has come on the back of a rapid return for labour demand from businesses as economies have reopened. This leaves eurozone unemployment just 0.5ppt above the record low of March 2021.’
As a result of falling levels of unemployment EUR investors now expect the European Central Bank (ECB) to take a more hawkish approach to monetary policy. This also follows an above-expected CPI reading on Tuesday.
In the absence of notable or market-moving Eurozone data today, the EUR is likely to be driven by its negative correlation with the US Dollar. Could souring risk-sentiment drive-up safe-haven demand for the USD and weaken the single currency?
GBP/EUR Exchange Rate Forecast: Could Strong Eurozone PMI and Retail Data Boost the Euro?
Pound (GBP) investors will monitor tomorrow’s release of the latest UK Markit services PMI for August. Any improvement in the UK’s largest sector would be GBP-positive.
Euro traders meanwhile will eye the latest Eurozone PMI composite data for August. If this posts above forecasts, then the EUR/GBP exchange rate would head higher.
Tomorrow will also see the release of the Eurozone retail sales data for July. Any indications of a recovering retail sector would boost the single currency.