EUR/GBP Exchange Rate Sinks Despite Growing Confidence in Eurozone Economy
The Euro Pound exchange rate rose today with the pairing currently fluctuating around £0.86.
The Euro (EUR) rose against Sterling today following the release of the latest flash Eurozone economic data for the first quarter. The quarter-on-quarter figure confirmed consensus at -0.6%.
Robert Alster, CIO at Close Brothers Asset Management, commented on the data:
‘The slow start is not proving to be an insurmountable hurdle – the quickening pace of vaccinations and a sharp rebound in global trade activity has caused the European Commission to forecast a brighter outlook, with 4.2% growth predicted in 2021, up from the 3.7% forecast in February.’
‘The risk now is that the north/south divide continues to widen. Germany’s economic growth is not far behind the UK’s, with its vaccination programme set to overtake, whereas Spain’s economy has been hardest hit.’
The single currency has also benefited from several European countries – including large economies like France and Germany – easing their Covid-19 lockdowns as infection rates continue ease off across the European continent.
As a result, EUR traders are becoming more hopeful that falling coronavirus infection rates could further help the Eurozone’s economic recovery in the months ahead.
Pound (GBP) Exchange Rate Rises on Strengthening UK Jobs Data
The Pound (GBP) rose today after the latest UK jobs data revealed that employment had risen, limiting the number of people unemployment. This is largely thanks to the Government’s Covid-19 vaccination rollout programme and easing lockdown restrictions.
As a result, Pound traders have become more confident that the UK economy could further recover over the course of the next few months.
Larry Elliot, the Guardian’s economics editor, commented on the latest jobs data:
‘The chances of finding work have now started to improve as a result of gradual easing of restrictions. More timely indicators of the jobs market – the HMRC figures for the people on payrolls – showed hiring was up strongly in April and concentrated in those sectors that have taken the biggest hit since the UK first started to feel the effects of Covid-19 in February 2020. Payrolls expanded by 97,000 in April, although they remain three-quarters of a million lower than their pre-pandemic peak.’
‘Assuming the government can stick to its plan of removing all restrictions by June, the improvement in the labour market looks likely to continue, with the under-25s – the age group most badly affected by lockdowns – the main beneficiaries.’
Nevertheless, GBP investors are becoming somewhat more cautious now the India variant potentially threatens the further easing of the UK’s lockdown measures in June.
EUR/GBP Exchange Rate Forecast: Could a Gloomy Outlook for the Eurozone Economy Weaken the Single Currency?
Pound (GBP) traders will await tomorrow’s release of the latest UK consumer price index for April. If this shows any improvement in the outlook for the British economy, then the GBP/EUR exchange rate would head higher.
However, if concerns over the India variant grow this week, then the GBP/EUR exchange rate would suffer as this could potentially delay further easing of lockdown measures next month.
Euro (EUR) investors will be awaiting tomorrow’s release of the Eurozone’s inflation data for April. Any signs of a slowing Eurozone economy, however, would weaken the EUR/GBP exchange rate.
