The EURGBP exchange rate has ran into resistance around the 0.8685 level after last week’s surge in the single currency. The level marked highs for the Euro in late-February and the pair is pausing here ahead of data on Tuesday with GDP for the UK and ZEW sentiment for Germany and the Eurozone.
The EUR to GBP rate is trading at 0.8670 and could see a quiet trading day unless there are political headlines.
UK GDP and European Sentiment Lead the Week
The latest British GDP growth outlook will be released tomorrow with a 3-month update for February. Analysts expect a reading of -1.9% for the figure, while year-on-year numbers are expected to show a loss of -8.3% in the UK. The country’s growth was boosted by recent upgrades to the final Q3 and Q4 numbers, while the OECD and IMF both gave upgrades for their 2021 outlook.
The German and Eurozone ZEQ sentiment readings will follow on Tuesday with both expected to show optimism in business owners, although extensions to recent lockdowns and a slower vaccination program may have hampered some of this upbeat sentiment.
The UK still has a lead on the EU in the vaccination front as the country passed 32 million vaccinations ahead of its April 15th target. The country is set to reopen further today with the start of outdoor hospitality venues, gyms and hairdressers.
Investors also forget that the EU economy wasn’t doing well before the virus appeared and once it passes, we will get a more realistic view of the post-Brexit and post-stimulus environment.
A lot of debt has been piled up by governments and this just pushed the economic problems further down the line with no real ability to lift the interest rates from zero out of choice.
Health Experts Urge Caution
A third wave is “highly likely” in the UK in summer or early Autumn, according to SAGE. The group’s Global Health Expert, Dr Peter Drobac, said this warning should be a “huge note of caution for all of us”. The constant doom and gloom being delivered by the likes of SAGE should certainly be a note of caution for markets, but their warnings seem out of context with the rate of vaccinations in the country.
The European Medicines Agency will give a news conference tomorrow or Thursday on the AstraZeneca jab and that could have a bearing on the EUR to GBP rate if they ban the vaccine, or limit its use amongst certain age groups. Europe has just started to ramp up its vaccinations and it would be another roadblock if further action is taken.
The UK is still expected to be fully reopened six weeks ahead of the EU and it is looking unlikely that EU countries will be seeing a quick return to former tourism numbers.
EURGBP is 0.15% lower on Monday and Tuesday’s data releases should determine whether the single currency can get above the resistance near 0.8700 for further gains.
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