The EURGBP rate is still hovering near the 0.8700 level on Thursday and that gives the pair hope for further gains later this week. The German unemployment figures released saw a slight rise in jobless claims, but the unemployment rate stayed the same. The market now awaits the German inflation number and tomorrow’s GDP estimates for the Eurozone, which could be the real event.
EUR to GBP has an upside target near the 0.8740-50 level, while weaker data could target the 0.8600 level.
Inflation will guide the EUR v GBP
German unemployment numbers saw a gain of 9k on Thursday against forecasts of a -10k drop. The number still didn’t move the pair much as the unemployment rate stayed at 6%. The country is still struggling with lockdown measures as it moves towards a possible reopening.
Traders will now turn their attention to the German inflation numbers today with a 1.9% number expected after 1.7% last month. This would be a strong trend higher and if it goes above expectations then it could impact the EURGBP. The economy would fully open with fragile sectors and higher prices, which could impact the ECB’s ability to stay at 0% interest rates. That would see some bond buying increases from the European central bank, which would weigh on the single currency again.
The UK could face a similar scenario as its economy also reopens and central bankers may find that the huge stimulus measures unveiled in the crisis were the easy part. Winding them down has caused market volatility in the past and could happen once more.
DeGuidos also talks higher inflation
President Luis de Guindos of the ECB policymaking team said: “Inflation could be higher than 2% at the end of the year,” in a scheduled speech today.
He also said that he expected a strong activity increase in the second half of the year for Europe’s economy. DeGuidos also reiterated the go-to line of central bankers lately buy saying that inflationary gains would be temporary. His comments also underlined the ECB President Christine Lagarde’s recent thoughts on keeping stimulus in place saying it was:
“Better to err on side of prudence when comes to withdrawing stimulus.”
Tomorrow will see core inflation numbers for the Eurozone and also flash GDP estimates for Q1 in Germany, Italy, and the wider Euro area. The numbers will let traders gauge the true path of the EUR v GBP exchange rate in 2021 as the growth will have to be strong to support the reopening pricing pressure.
German inflation is expected to be 1.9%, while the European number tomorrow is for 0.8%. The Eurozone is also expected to see a Q1 GDP loss of -0.8% due to ongoing virus restrictions.