GBP/EUR Exchange Rate Edges Higher as Optimism in the UK Economy Rises
The Pound Euro (GBP/EUR) exchange rate rose by 0.5% today. Demand for Sterling has grown as Prime Minister Boris Johnson prepares to make announcement on July’s easing of lockdown restrictions. The pairing is currently fluctuating around €1.16.
Sterling has risen on renewed confidence in the UK’s economy today with the easing of lockdown restrictions this month to further fuel the nation’s economic recovery in the months ahead.
Boris Johnson recently said:
‘As we begin to learn to live with this virus, we must all continue to carefully manage the risks from Covid and exercise judgment when going about our lives.’
Nevertheless, the UK Government has received heavy criticism, particularly over conflicting statements over mask-wearing, and the rising number of Covid-19 cases threatening the NHS’ ability to cope with a new influx of hospitalisations.
Today saw the UK report 27,334 new daily cases of coronavirus cases, its second highest daily total since the end of January.
However, with hospitalisations and deaths remaining relatively low, GBP investors are confident that the easing of lockdown restrictions later this month will go ahead.
In UK economic news, today saw the release of June’s services PMI, which beat forecasts and rose to 62.4.
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, commented on the report:
‘The services sector continued to expand at record-level rates as marketplaces opened up and consumers returned to hospitality with a fourth sharp monthly rise in new business and the highest job creation levels for seven years.’
Euro (EUR) Exchange Rate Dips on Dovish ECB Commentary
The Euro (EUR) fell today following dovish comments from the European Central Bank’s (ECB) President, Christine Lagarde, last week. Lagarde said that the Eurozone’s economic recovery remains ‘fragile’ despite the EU’s vaccination programme.
The latest Eurozone economic data pointed to a slowdown in Germany’s latest PMI composite report for June.
Instead of remaining at 60.4 it dipped slightly to 60.1 last month, leaving some investors concerned about the outlook for the bloc’s largest economy.
Chris Williamson, chief business economist at IHS Markit, warned about rising inflationary pressures, saying:
‘Europe’s economic recovery stepped up a gear in June, but inflationary pressures have also ratcheted higher.
‘Firms are increasingly struggling to meet surging demand, however, in part due to labour supply shortages, meaning greater pricing power and underscoring how the recent rise in inflationary pressures is by no means confined to the manufacturing sector. Service sector companies are hiking their prices at the steepest pace for over 20 years as costs spike higher, accompanying a similar jump in manufacturing prices to signal a broad-based increase in inflationary pressures.’
However, with the outlook for the Eurozone’s economy remaining relatively positive, with PMI data pointing to a strong recovery in the bloc’s key economies, we could see the EUR/GBP exchange rate begin to edge higher later this week.
GBP/EUR Exchange Rate Forecast: Could Robust UK Construction Data Boost the Pound?
Euro (EUR) traders will be looking ahead to Tuesday’s publication of the Eurozone’s ZEW survey of the latest economic sentiment gauge for July.
Any improvement in economic morale in the Eurozone would be EUR-positive.
Tomorrow will also see the release of the Eurozone’s latest retail sales data for May. Could rising retail sales buoy-up the EUR/GBP exchange rate?
Pound (GBP) investors will await tomorrow’s release of the latest UK construction PMI. If this shows an improvement in the construction sector last month, then the GBP/EUR exchange rate could head higher.