Pound Euro (GBP/EUR) Exchange Rate Climbs as Sunak Unveils £1bn Support Package
(Updated 17:00, 21/12/21) The Pound Euro (GBP/EUR) exchange rate has continued to gain ground today, although it hasn’t been a smooth ride.
The earlier Brexit optimism may have been undermined by comments from Foreign Secretary Liz Truss, who has taken on the role of chief Brexit negotiator. In a call with her EU counterpart, Maroš Šefčovič, Truss reiterated the UK’s stance:
‘The UK position has not changed. We need goods to flow freely between Great Britain and Northern Ireland, end the role of the ECJ as the final arbiter of disputes between us…
‘If this does not happen, we are prepared to trigger Article 16’.
However, the Pound (GBP) was boosted by news that the Chancellor, Rishi Sunak, will make a further £1bn in support available to the hospitality and leisure industry.
The announcement received mixed responses. Many businesses are grateful for the new support package, but those in the night-life and travel sectors are concerned that there will be no further support for them.
Meanwhile, the Euro (EUR) remained under pressure as Omicron cases sweep through continental Europe. Many European countries have implemented or are considering implementing new restrictions to curb the spread of the virus.
At the time of writing, the Pound Euro pair is trading just shy of €1.176, up 0.33% from this morning’s opening level.
Original article continues below:
Pound Euro (GBP/EUR) Exchange Rate Gains on Brexit Comments and German Consumer Confidence Slump
The Pound Euro (GBP/EUR) exchange rate is gaining ground today, despite the ongoing concerns about Omicron in the UK.
The upside seems to be due to some upbeat Brexit news and a sharper-than-expected drop in German consumer confidence.
Pound (GBP) Gains on Upbeat Brexit Comments
The Pound (GBP) is climbing up from one-week lows against the Euro (EUR) today as GBP investors shrug off Omicron and Brexit concerns.
The ongoing and deadlocked talks between the EU and the UK over the Northern Ireland protocol have been a headwind for the Pound for months. The issue rose to the fore again over the weekend after the Brexit minister Lord Frost resigned.
The resignation initially rattled GBP investors who were concerned it could delay or derail an agreement between Brussels and London. However, this morning Ireland’s Taoiseach (Prime Minister) Micheal Martin said that the talks are on track for progress.
Liz Truss, the Foreign Secretary, has taken on the role of chief negotiator. Although Truss is popular among Eurosceptics, some analysts believe she might take a softer approach on the Northern Ireland protocol than her predecessor. There are rumours that Lord Frost resigned because the government is preparing to step back from its hardline Brexit stance. A softer approach might mean that an agreement is within reach, thereby avoiding a damaging trade war.
Taoiseach Martin’s comments seem to have cheered GBP investors today, allowing Sterling to make some gains.
Euro (EUR) Dented by Drop in German Consumer Morale
Meanwhile, the Euro is losing ground today after consumer morale in Germany plunged as we head into 2022.
The GfK consumer confidence indicator for January dropped from -1.8 to -6.8, far worse than forecasts of -2.7. This was the worst reading since June, when the indicator was at -6.9. The slump in morale comes amid a fourth wave of Covid infections and fears that a fifth wave will follow.
The report is the latest troubling piece of data from Europe’s largest economy. Germany’s economic recovery is faltering. The country’s manufacturing industry has struggled amid the global supply chain crisis, and now the services sector is feeling the bite of new Covid restrictions.
Prospects of even tougher Covid restrictions in several European countries are also weighing on the single currency. Over the weekend, the Netherlands announced a strict lockdown over the festive period. Other countries have also tightened measures in an effort to curb the spread of Omicron.
Pound Euro Exchange Rate Forecast: Omicron in the Spotlight
As Omicron sweeps around the world, any new developments will likely cause movement in the Pound Euro pair. If more European nations introduce lockdown restrictions, this could dent the Euro, while rising hospitalisations or new measures in the UK would hit the Pound.
Later this afternoon, the Eurozone’s flash consumer confidence report for this month is due out. If it prints worse than expected, as Germany’s did, then EUR may slip further.