The EURGBP exchange rate tested the 0.8500 level for the first time this year as weaker Eurozone data boosted sterling. Stronger UK PMI data yesterday outperformed the Eurozone, while German retail sales added to weaker employment figures in Europe’s largest economy.
The EUR to GBP rate has bounced from the lows to 0.8511 but without any economic data today, markets be wait for next week before any further movement.
France Enters Another Month of Lockdown
France has entered another month of lockdown with the country seeing another wave of virus cases. The news is another weight on the euro, which is finding it hard to see any positives lately. The World Health Organization has also criticized Europe’s vaccine rollout as “unacceptably slow” as the bloc loses ground in the race to reopen.
Europe is struggling as the UK continues to move towards a loosening of restrictions in the country. Boris Johnson will make a speech on Monday regarding the travel situation to foreign destinations, with outdoor restaurants and pubs returning a week later.
The longer it takes to reopen, the more structural damage could be seen in Europe’s economy and German figures this week were weaker than expected in employment and retail sales. Manufacturing and exports are holding up the rest of the sectors, but car giant Volkswagen has announced big job cuts as it seeks to cut costs, so industrial powers may wane and that would put further pressure on the euro.
Our World in Data has said that the UK has given at least 1 dose to 46% of its residents, which is the third highest in the world. The EU countries are still stuck around the 11% mark and traders have to start looking at a longer delay in the ECB rebound story.
UK GDP Provides a Springboard For the Year
The week also saw a better fourth quarter than expected for the UK, with the Office for National Statistics reporting a rebound of 16.9% and 1.3% in the third and fourth quarters of 2020. The readings were an upward revision on previous estimates of 16.1% and 1%.
Amidst all of the virus headlines, it is easy to forget that the UK will begin trading as a sovereign entity and once the world gets back to business, there will be new opportunities for trade.
The near-term moves in the EURGBP will depend on Boris Johnson’s pace of reopening. After vaccinating the vulnerable age groups with two doses of the vaccine, there is no real case for sticking to two-month old dates for opening. Unfortunately, that is what will likely happen, and the UK could miss out on some extra weeks of trade.
If the EURGBP can get back through the 0.8500 level then the 2020 lows near 0.8300 would be the target. Speak to us ahead of your euro exchange to discuss these factors and their impact on the euro exchange rate.