The EUR to GBP exchange rate has surrendered gains of 0.20% on Thursday, with the pair trading at the April 2020 lows of 0.8685. Traders are showing caution as Boris Johnson gets cold feet about the reopening of the UK’s economy on Monday, but the British pound is still in command.
EURGBP could consolidate ahead of Friday’s retail sales data from the UK.
Friday Sees Latest UK Retail Update
Friday will see an update on the UK’s retail sales numbers and the forecast is for a dismal -1.3% figure. Last month saw retailers post a 2.9% growth rate and the figure stalled at 5.8% in October ahead of the November lockdowns.
The slump in retail makes it even more important that PM Boris Johnson steps up his “cautious, prudent” approach to reopening as the country has savings to burn. The Bank of England’s Chief Economist Andy Haldane has said that the country has £125bn of “pent up” savings from the recent lockdowns and the number could double to £250bn on current trends by June.
Much of this would go into retail, hospitality and the hospitality sector, which are all part of the UK’s all-important services sector. Opening up this sector last when 25% of the population has been vaccinated would be another Boris blunder. The EU is behind the UK in its vaccination programme and this would be an amazing opportunity to reopen the economy, alongside the Chancellor’s March 4th budget and supercharge a second quarter economic surge.
Monday will be the government’s opportunity to grasp this moment and the EURGBP exchange rate path for the year will be largely decided by Monday’s announcement.
ECB Monetary Policy Minutes May Not Give Much Away
Today sees the release of European Central Bank policy meeting minutes, but there may not be much that we don’t know about. The only thing to look for would be any mention of imminent stimulus or negative rates.
The Bank of England has pushed any potential move to negative rates out to July, but inflation and a potential second quarter economic bounce could remove it from the conversation. The European economy is lagging, alongside its vaccine programme and the ECB could add fuel to the recent sterling rally.
Current head of the central bank, Christine Lagarde, has already said that the Eurozone will need fiscal help into 2022, but the bank has been happy to sit with rates at 0%. Some European nations have rates in negative territory, while most are at zero. The UK could be on a path to dislocating from the EU as the year continues and that could see the pound close the gap on the pre-referendum trading levels.
The EURGBP pair could drop if the UK gets a green light for reopening with the 2020 lows near 0.8300 being the target for the year ahead. Get in tough with us ahead of the next announcement on Monday to see how the EURGBP rate will be impacted.