Euro to Pound Rate Dips following German Lockdown

EURGBP Inches Higher Ahead of Inflation Release

The euro to pound exchange rate gave up a second day of gains after Germany extended the country’s coronavirus lockdown. Sterling had lost ground on the week after Boris Johnson’s decision to put the UK into a full lockdown on Sunday. The Euro was also dented by a worse-than-expected German employment number.

EURGBP was trading 0.12% higher on Wednesday as it seeks to regain a stronger footing for the rest of the week.

Germany Extend Coronavirus Lockdown

German Chancellor Angela Merkel is extending the country’s lockdown until the end of the month and introducing stricter measures as it seeks to curb another rise in virus infections.

The new measures will restrict non-essential travel of residents for the first time. As in Britain, the move has seen businesses in various sectors pleading with government for additional assistance to avoid business closures and job losses. The new rules also see family gatherings restricted to one member of another household.

Germany has started a vaccination program on December 27th, but the media has criticised the government for the slow pace of the rollout, and also for ordering too many doses. As of yesterday, only around 300,000 of Germany’s 83 million population had received a shot.

Merkel put a dampener on market hopes for a quick end to the virus measures, saying:

“Maybe the expectation was raised that there’s as much vaccine available as we need and we just need to give the shots. That will not be the case in the first quarter”.

This will be a key driver of markets in the first half of the year as countries will see their currencies judged on the speed that they can get back open and repair the damage.

PMI Figures Ahead for European Nations

Today will see PMI figures released for the UK and other European countries. The UK services number is expected to come in at 49.9 after a 47.6 reading last month. The services sector is a big one for the country’s economy, but the lockdowns have dented the tourism and hospitality sector.

The day will also see a mix of data with German PMIs and inflation, while France also sees the latest inflation and consumer confidence. The German inflation number will be most important for the Euro after the ECB put a lot of focus on the strength of the euro and the country’s deflationary stance.

Resistance for the EURGBP rate is at yesterday’s high of 0.9050 with the 0.9175 resistance being key. The pound has seen little follow-through from the signing of the Brexit deal and the smooth transition of the trading arrangements.

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