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Pound Euro (GBP/EUR) Exchange Rate Muted as Sunak Announces ‘Hardship Lies Ahead’

Pound Sterling Euro (GBP/EUR) Exchange Rate Flat as Chancellor Focuses on Job Retention

UPDATE: The Pound Sterling Euro (GBP/EUR) exchange rate remained flat on Wednesday afternoon. This left the pairing trading at around €1.1107.

Sterling remained flat as Finance Minister, Rishi Sunak warned of hardship ahead as he laid out plans to help protect the economy.

Speaking today in parliament, the Chancellor said:

‘We face profound economic challenges. People need to know we will do all we can to give everyone the opportunity of good and secure work. People need to know that although hardship lies ahead, no one will be left without hope.’

Sunak announced a range of schemes including a ‘new jobs retention bonus’ and ‘kickstart scheme’. He said this will ‘directly pay employers to create new jobs for any 16 to 24-year-old at risk of long-term unemployment.’

Britain’s government is seeking to prevent an employment crisis and the Chancellor announced they would be paying bonuses to employers that bring workers back after the furlough scheme ends.

Sunak said:

‘I want every person in this House and in the country to know that I will never accept unemployment as an unavoidable outcome.

‘We haven’t done everything we have so far just to step back now and say, ‘job done’. In truth, the job has only just begun.’

Pound Sterling Euro (GBP/EUR) Exchange Rate Muted Ahead of Sunak’s Budget Speech

The Pound Sterling Euro (GBP/EUR) exchange rate remained flat on Wednesday morning. This left the pairing trading at around €1.1114.

Sterling was left largely flat this morning as all eyes turned to British Chancellor Rishi Sunak who is expected to map out the government’s next moves.

Sunak is likely to announce moves that will try to prevent a wave of job cuts becoming an employment crisis for the UK.

The Chancellor is set to take borrowing to levels not seen since World War Two as he is expected to subsidise more than a third of private-sector employees.

Sunak’s announcement will include a £2 billion fund to create six-month work placement jobs for 16-24 year olds that are unemployed. This is the largest ever increase in partly government funded apprenticeships.

Rishi Sunak noted:

‘Young people bear the brunt of most economic crises, but they are at particular risk this time because they work in the sectors disproportionately hit by the pandemic.’

This likely offered Sterling some support as the Resolution Foundation think tank has estimated that this could help up to 300,000 young people get into work.

Britain’s economy has shrunk by over 25% in March and April and data has shown there has been limited recovery for the sectors hardest hit.

Even three weeks after the end of lockdown, data has shown that the number of shoppers visiting retailers is still down by around 50% compared to last year.

With this, and the possible shock of Brexit at the end of 2020, Rishi Sunak has resisted calls to announce a full budget statement. This means he could reserve the majority of his fiscal firepower until autumn.

Euro (EUR) Flat as France Expected to Rebound Sharply

The single currency was left flat against the Pound despite upbeat forecasts from one of the bloc’s largest economies.

The French economy is expected to rebound sharply in the second half of 2020 after a steep coronavirus-fuelled slump.

INSEE statistics agency said today that the bloc’s second largest economy is likely to shrink by -17% in Q2 compared to the first quarter.

However, the economy is predicted to rebound by 19% in the third quarter and by a further 3% in the final quarter.

Over the course of 2020, INSEE has forecast the economy was set to contract by -9%. This would make it France’s worst recession since records began in 1948, although this was not as bad as the government’s -11% slump prediction.

Pound Euro Outlook: Chancellor’s Budget and German Exports in Focus

Looking ahead, the Pound (GBP) is likely to make gains against the Euro (EUR) following Rishi Sunak’s Budget speech.

If Britain’s Chancellor announces a range of new measures aimed at supporting the economy through the worst of the coronavirus crisis, Sterling will rise.

Meanwhile, the single currency could claw back some of these gains on Thursday following the release of May’s German trade balance data.

Statistics are expected to reveal exports have increased for the export-reliant economy after Germany suffered the brunt of the coronavirus crisis. This would offer support and cause the Pound Euro (GBP/EUR) exchange rate to slide.