EURGBP at a Key Juncture Ahead of Data and Budget

EURGBP Moves Lower After UK GDP Growth Improves

The EURGBP exchange rate is trading at a key level ahead of the latest German employment data, Eurozone inflation and tomorrow’s UK budget.

The pair saw a low near 0.8550 before a rally to 0.8700 as the euro found support. The EURGBP will now likely break from one of those levels on the UK budget tomorrow.

What to Expect From the UK Budget

British finance minister Rishi Sunak is set to announce the latest budget for the country as he aims to stimulate a strong recovery in line with the Prime Minister’s reopening plans. At the same time, Mr Sunak also has to address the country’s deficit, which is expected to rise to the £400bn.

Tax rises and support spending are set to be the key talking points of the budget. Many economists have warned against rising taxes too early, but there is talk of a 6% corporate tax rise. The EUR to GBP outlook will swing on the taxation outlook as everyone expects stimulus for sectors such as hospitality.

Sunak could be set to announce a one-off windfall tax on businesses that have seen success in the crisis, such as supermarkets and online retailers. The Sunday Telegraph is reporting that a tax on online deliveries could come and this could hit e-commerce shares.

On the jobs front it is likely that the furlough scheme will be extended, and Sunak’s “Plan for Jobs” announced a £126m investment in apprenticeships and traineeships, which is a hint of what’s to come in the budget. The government are aware of the damage that their lockdowns have done, and this budget could have a sweetener for every corner of the economy that has struggled. Pubs were also set to get a potential boost if VAT cuts are extended to the sector in the post-EU trading structure.

Tomorrow’s budget will be weighed against Boris Johnson’s reopening plan and this could set the tone for the pair for the rest of the month.

German Unemployment Should be Muted

Today sees unemployment figures from Europe’s largest economy, but Germany is only set to see a loss of -14k jobs. The country has seen its economy doing well with the manufacturing industry less affected by lockdowns. The previous month saw a loss of -41k jobs so there is still the opportunity for a surprise.

The Eurozone sees core inflation numbers later this morning and that could move the pair if prices move higher than expected. Last week saw bond yields rising as traders priced in the expectation for inflation and many see the forecasts of central banks as being too lengthy. The banks have said 2023-24 will be the first action on interest rates but markets could push them on that if the reopening of economies spurs price rises.

The European Central Bank’s vice president told Portuguese newspapers over the weekend that the bank has the “flexibility to counter any undesired rise in bond yields”.

Get in touch to discuss these factors in further detail ahead of your euro to pound currency exchange.