Pound Euro (GBP/EUR) Exchange Rate Rises Higher as US Data Dents Euro
(Updated 15:45, 09/12/21) The Pound Euro (GBP/EUR) exchange rate has continued to rally this afternoon, recovering about half of yesterday’s losses.
The upside comes as some strong data from the US weighed on the Euro (EUR). US initial jobless claims beat forecasts, dropping to their lowest level in over 50 years. As a result, the US Dollar (USD) strengthened.
This put pressure on the single currency due to the negative correlation between USD and EUR. In addition, the data boosts Federal Reserve rate hike bets, further highlighting the divergence in policy between the European and American central banks.
The Pound Euro pair is currently trading just shy of €1.17, about 0.34% up from today’s opening level.
Original article continues below:
Pound Euro (GBP/EUR) Exchange Rate Gains on German Data Miss
The Pound Euro (GBP/EUR) exchange rate is rising so far today after plummeting to a two-month low on new UK Covid restrictions.
The upside comes as the Euro (EUR) faces selling pressure following Germany’s disappointing trade data.
Pound (GBP) Crawls Up from Two-Month Lows
The Pound is edging higher against the Euro (EUR) this morning after plunging to a two-month low last night.
The government’s announcement that it intends to implement its Covid plan B – which includes new restrictions on vaccine passports, mask-wearing and working from home – triggered a sharp selloff in Sterling. Investors are worried that the new measures could further hamper the UK’s slowing economic recovery.
The proposed measures will go before parliament next week, where the government faces a substantial rebellion amid the furore of ‘Partygate’. Allegations that government ministers and civil servants gathered for unlawful indoor social events during Covid restrictions last Christmas have rocked confidence in Boris Johnson’s government, with backbench Tory and opposition MPs expressing outrage.
Experts are worried that the controversy will mean people are less likely to follow the government’s guidance on Covid measures.
Market strategist Bill Blain has said that concerns over ‘political shenanigans’ and the UK’s fragile economic outlook are denting the Pound:
‘Working from home has very clear economic implications – and kills the December party season. Consequences, consequences.
‘More and more the UK feels like a struggling health service with an inefficient nation attached. It’s not a good look.’
However, the Pound seems to have now stabilised and is inching higher against the Euro. The upside seems driven by a weakness in the Euro and a risk-on market mood as well as investors buying the dip.
Euro (EUR) Falls as Germany’s Trade Surplus Narrows
Meanwhile, the Euro is slipping today after Germany’s latest balance of trade figures missed forecasts.
In October, the trade surplus in Germany unexpectedly narrowed from €16bn to €12.8bn. This was below estimates of a rise to €18.4bn and far below the surplus of €19.7bn in the same month last year.
The report is the latest piece of poor data from Europe’s largest economy, which has struggled particularly hard through the pandemic. Germany has faced relatively high infection rates and long periods of lockdown, while global supply chain disruption has hammered its vital manufacturing industry.
Pound Euro Exchange Rate Forecast: GBP/EUR Gains Limited?
The Euro could face further headwinds this afternoon due to its negative correlation with the US Dollar (USD). Market consensus expects US initial jobless claims to hold at pre-pandemic levels. This may give USD a boost, thereby weighing on EUR.
However, any upside in the Pound is likely to be limited, considering the pressure that it’s currently under.
Tomorrow’s UK GDP data could potentially bolster Sterling. Economists expect GDP to have grown by 0.4% in October. A stronger reading could give GBP investors new hope while a weaker reading may see Sterling plunge again.