EURGBP Slumps as UK Virus Cases Retreat

EURGBP Breaks Below 0.8500 with April Lows in Sight

The EURGBP exchange rate was 0.25% lower on Monday after the release of weaker German business sentiment figures and the news that the UK had seen a sixth-consecutive day of lower virus cases. Tuesday will be a quiet day for economic data and the pound should stay supported ahead of data from Europe later in the week.

The EUR to GBP now trades at 0.8540 with the July lows coming in at 0.8503.

European virus surge sees US restrictions and covid passes

The US said on Monday that it will keep the existing virus travel restrictions on international travel in place for now due to concerns about the surging infection rate.

The latest move was a reversal from the statements by Joe Biden earlier in the month where he said his administration was “in the process” of working out how soon to lift the ban on European travel to the country. Most of continental Europe has now relaxed restrictions on American travellers who are fully vaccinated, although the UK still requires quarantine for most visitors arriving from the US.

Europe is also going down the route of covid passes after France and Italy decided to enact the measure to enter tourist attractions and entertainment venues. During the weekend, a number of senior politicians in Germany also floated the idea of imposing restrictions on the unvaccinated and even mandatory shots, defying previous comments from Chancellor Angela Merkel that the country wouldn’t go down that road. Critics are angry at the move to mandatory health passes and say that they are creating a two-tier society, with some groups excluded from activities.

The UK has seen a sixth-consecutive day of lower virus cases, with the Monday figure coming in below the 25,000 figure and that is helping to support sterling in the euro to pound exchange rate.

German data will dominate in the week ahead

The German economy got the ball rolling on a week of economic data with a lower-than-expected IFO Business Climate release. The index came in at 100.8 compared to expectations for a higher print of 102.1.

The figures are based on a survey of 9,000 business owners and they highlight continued uncertainty in the current climate as the recovery them is threatened.

Wednesday will se UK mortgage approvals released but German consumer confidence will have a greater effect on the EUR v GBP. Thursday will then add the latest unemployment numbers and inflation for Europe’s largest economy, followed by a GDP update on Friday. Eurozone inflation numbers will also be released that day.

Consumer confidence is expected to be higher but that is not definite with the recent restrictions in the country. Inflation is expected to surge to 3.3% from 2.3% as the VAT measures implemented during the pandemic are unwound.

The EURGBP exchange rate trades at 0.8540 and the data this week could see the pair on course to test the April lows for the year under 0.8500.