The EURGBP exchange rate was trading below the 0.8500 level on the first full day of trading after the Easter holiday. Sterling is stronger after the Prime Minister approved the April 12th reopening of ‘non-essential’ businesses.
The EUR to GBP rate saw fresh lows for the year yesterday despite stock markets being closed and the pair will likely move on comments from Boris Johnson later today.
Europe’s Virus Wave Builds
The FT said on Sunday that hospitalizations and fatalities from the virus are increasing in nations across Europe. Countries are said to be battling a “a more infectious variant, a shortage of vaccines and public weariness with lockdowns”.
Countries have attempted to boost their vaccine rates last week, although the Easter weekend hampered the rollout. French President Emmanuel Macron confirmed the country’s third national lockdown last week as it battles against a surge in cases. New cases are said to have risen 55% in the space of two weeks. The FT also said that Belgium has noted a rise in cases of 95% and Netherlands saw an increase of 48%.
The figures are a real threat to the euro, which has the potential to see much of Europe in lockdown while the UK is open for the remainder of the second quarter. Such a turn of events would also pressure employment figures and could see further stimulus measures announced, which again, would hurt the euro.
Johnson in no Hurry for Travel Options
Despite consistent calls to support the airline industry, the Prime Minister is still not giving a green light to the foreign travel option, with the May date still being the apparent plan. The PM was set to talk later on Tuesday in order to provide more information on travel.
Under the government’s proposed traffic light system, travellers would take a test before and after flying to a green zone, while those going to a so-called red zone would still face quarantines in government-approved hotels. A continuation of complicated, and changing, rules would likely see UK citizens have a change of heart about holidaying after the belief that a vaccination would see a return to previous freedoms.
If the virus situation does halt travel then the UK economy could get a further boost from domestic spending. Personal savings rates soared during the lockdowns with a savings rate of 25%in mid-2020. This has dropped to around 16% but the economy had previously seen savings rates of 5-7% for an extended period due to the change in culture towards credit and spending.
If the foreign holiday situation drags into May, it’s possible that this will be delayed again and Britons will throw in the towel for a holiday and decide to spend their money at home. The Euro vs Pound exchange rate could unwind more of the post-Brexit referendum losses if the UK opens and Europe is shut down again with little tourist income.
The lows for 2020 were near 0.8300 in the EURGBP and this would be the next target for the pair if the downward trend continues. Get in touch to discuss the future of GBPEUR rates, so you can plan ahead of your currency exchange.