The EURGBP exchange rate is seeing a second day of gains as traders slammed the brakes on the Boris Johnson reopening drive. Hopes for an earlier return to travel were dashed, while investors started to price in the cautious approach of the Prime Minister and take some profits on the pound.
The EUR to GBP rate is 0.36% higher on Wednesday after a sharp move higher from yesterday’s open at 0.8490 to 0.8630 today.
Services PMI Expectations Could Burn Sterling
Services Purchasing Manager’s Index (PMI) data will be released for the European countries today, and high expectations for the UK number could hinder the pound. After a reading of 49.6 last month, the country is expected to see 56.6 this month. It seems a high number with lockdowns, and any disappointment could add to the current negative tone in sterling.
The same figures are expected to come in nearer the 50 level in Germany, 49 in Italy and 46 in Spain, so there is less expectation in the European readings.
Traders may shrug off the numbers due to the lockdowns in Europe, and the move to reopening of the services sector in the UK, but in the short-term the pound is under pressure.
Boris Johnson’s Monday speech had raised hopes of a speedier return to travel but he is sticking to his planned May 17th date, while his scientific advisors seem more interested in warning of third waves and variants. This is taking the shine off the reopening plans and there is also a brewing battle over vaccination passports, which Johnson seems intent on pushing through against the will of many Tory MPs and the opposition.
German Minister Supports Lockdown
Germany’s Finance Minister has said that now is not the time for reopening the country’s economy. In an interview with CNBC, Olaf Scholz said:
“There is not a time for opening. This is the time for being very tough, for keeping infection rates down”.
The question should be asked about when the German economy, and others in Europe, will actually open. France has gone into another lockdown over its supposed third wave and as we have seen in the UK, full vaccination is not an indicator of a smooth reopening. Europe is said to have upped its vaccination program, but the key economies will have administration rates that are around 20%, compared to the UK’s 60%.
The UK Prime Minister has said that he is sticking to his May 17th foreign travel target, but Germany and Italy will be off the list for a surge in UK holiday spending. This will leave a few ‘green light’ countries, but today we are hearing that a cheap family Easyjet holiday for four would require £600 for testing. The hopes for a summer revival in tourism for Europe is starting to look bleak, while the reopening of the economies is also on a slow path.
EURGBP is trading above the 0.8600 level with the stronger resistance at 0.8685. Get in touch to discuss your upcoming euro exchange and be kept up to date with the latest market movements so you can make informed decisions about when to trade.