The EURGBP rate is trading near the 0.8700 level, but the pair could see a breakout today as the Eurozone will release GDP figures, alongside the German and Italian economies. Next week will also see an update from the Bank of England, so the recent low volumes on sentiment numbers will change.
EUR to GBP has rallied from under 0.8500 since the beginning of April as large traders unwound big bets on the British pound.
GDP set to drive the EUR v GBP
German unemployment was 9k higher on Thursday compared to expectations for a drop of -10k. The unemployment rate stays stuck at 6% as the lockdowns persisted in the country. Further data from Germany saw the country’s inflation rate moving above 2% for the first time in two years. This could pressure the ECB once the economies are fully open, but for the EUR v GBP rate it will be the same issue for sterling.
The focus will now turn to GDP figures with the German economy expected to show a drop of -3.2% for Q1, while Italy has a better forecast at -1.6%. Despite the gap, the German would rebound more quickly than its European counterpart. GDP for the overall euro area is expected to show drop of 0.8% for the quarter, while inflation is set to print 0.8% in the core number.
The Eurozone countries are expected to see decent growth despite the lockdowns and this is a risk to the EUR v GBP outlook if there was some sort of change in the outlook.
Scotland set to vote as RBS warns of indy move
Nicola Sturgeon was dealt a blow to her independence hopes after the Royal Bank of Scotland (RBS) warned it would move its headquarters to London in the event of Scottish independence. The headline is really just a repeat of the old pantomime that played out over Scottish independence and the same arguments would follow.
Scottish voters will get a chance to vote on the prospects of another referendum when Scotland sees elections in May. A recent blueprint of actions to be taken in the first 100 days had no mention of independence-related moves, according to the Telegraph.
With the recent tensions in Northern Ireland, and yesterday’s resignation of the DUP leader Arlene Foster, there are some who would like to see a united Ireland. Adding a Scottish exit to the mix would be a headwind for the British pound.
Next week will see the latest interest rate decision from the Bank of England and analysts fully expect the bank to stay on hold with rates. Some are also expecting the bank to taper its stimulus in light of the recent economic gains in the British economy.
It was only a few months ago that the BoE was talking about negative rates in the country as it looked fragile. There has since been a strong economic bounce and the UK is expected to do well.