The Office for National Statistics released first quarter Gross Domestic Product (GDP) figures for the UK this morning, at the unusual time of 07:00 alongside Year on Year GDP figures for March. As expected, economic output in March dipped dramatically compared with January and February in the UK, as March was when the UK lockdown rules were implemented. After seeing Europe and the US release significant slowdowns during Q1 (the first quarter of the year) market analysts were expecting to see a release of -2.6% but the actual figure released was -2% so the fall wasn’t as dramatic as some had expected.
Perhaps the reason for the euro’s strong performance against the pound recently, with the exception of this mornings spike for the pound, can be attributed to some countries within the Eurozone beginning to lift lockdown rules as the numbers of new cases of COVID-19 are declining. The UK on the other hand is behind the curve and currently happens to have the second highest number of fatalities after the US. The measures put in place by the UK Government will remain for now although in England they’re beginning to be lifted slightly. Yesterday, Chancellor Rishi Sunak announced that the government’s furlough scheme will remain in place until October, and that some UK companies would be required to help from July.
Within the Eurozone one of the key topics is the tension between German lawmakers and the European Central Bank (ECB) at the moment, and this is worth being aware of if you’re following the euro’s value. German lawmakers have questioned whether the ECB’s Quantitative Easing programme is proportionate, and hav given the ECB 3 months to demonstrate that it is. This is just the latest demonstration of tensions within Europe regarding the sharing of debt, and this stems from the QE programme implemented a few years back, so the matter could resurface once again in relation to the spreading of debt to counter the effects of the ongoing lockdown.
Brexit Negotiations Still a Key Topic
Aside from economic data releases and the negative economic effects of the almost global lockdown, Brexit is also likely to resurface at some time this year as the UK is supposed to be exiting the transitional period at the end of the end of January next year. Both the UK and EU lead negotiators have publicly outlined hopes that progress would be made by June but due to lack of movement and therefore meetings, this is now looking unlikely. There are concerns that the UK will leave the EU without sufficient trade deals in place so I expect this subject to be in the news once again sooner rather than later.
On Thursday this week, German inflation data will be released and this could be watched closely by the markets in case the figure released deviates from the expectation, and then on Friday German GDP figures will be released, so there could be a busy end to the week for euro exchange rates. Also, as the euro and US dollar are the most traded pair it’s worth noting that US Federal Reserve Chairman Jerome Powell will be speaking later today, and any major market movements for the US dollar as a result of his comments could impact the EURUSD exchange rate. With the slowing of the US economy there have been mentions of negative interest rates from figures such as US President Trump so financial markets may be paying close attention to the language used by Powell later today.
For more information about how these factors are likely to impact your upcoming euro to pound currency exchange, get in touch using the form below.