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Pound to Euro Exchange Rate Dips as UK Economy Enters Crossroads

European Central Bank

GBP/EUR Exchange Rate Falls as UK Businesses Urge for Further Support Ahead of Spring Budget

The Pound to Euro exchange rate fell by -0.2% today as the UK has entered a crossroads in its economy while businesses continue to plead for further support ahead of the Spring Budget. The pairing is currently fluctuating around €1.15.

Tony Danker, the director general of the CBI, speaking of Chancellor Rishi Sunak, commented:

‘The chancellor must finish what he started: doing whatever it takes to back UK business. The more businesses – the more jobs – that we can see through the crisis, the faster we can snap the economy back into shape.’

As a result, GBP investors are becoming more concerned about the UK’s economy despite Downing Street’s outline of a lockdown exit plan.

Instead, UK markets are gearing up to a steady reopening and numerous other barriers in the form of ongoing adjustments to Brexit.

Today also saw news that Primark, one of the UK’s largest clothing retailers, had suffered and £1.5 billion loss in sales from the coronavirus pandemic.

Consequently, this offers a glimmer of the damage suffered by the retail sector as a whole because of Covid-19 lockdowns and restrictions.

ABF commented:

‘This period has been characterised by the impact on our trading of the restrictions on the movement of people put in place by UK and European governments to limit the spread of COVID-19. The extent and timing of restrictions have varied by market, with different approaches taken by each government and during this first half, unlike the first lockdown, all of our stores have not been closed at the same time.’

Euro (EUR) Edges Higher as Risk-Sentiment Weighs on Demand for US Dollar

The Euro edged higher against the Pound today as improved risk appetite has weakened the single currency’s biggest rival – the US Dollar.

US Federal Reserve Chair Jerome Powell said that it would take around three years for US inflation to get back on target, signalling that stimulus measures would not be removed any time soon.

Jim Reid, an analyst at Deutsche Bank, commented:

‘Risk appetite showed signs of returning to global markets over the last 24 hours as Fed Chair Powell stuck to his reassuring tone and continued to signal that the central bank would keep policy accommodative for some time to come.’

In Eurozone economic news, today saw the release of March’s GfK Consumer Confidence Survey.

German consumer morale, however, beat forecasts rising from -15.5 to -12.9. However, the outlook for the Eurozone’s largest economy remains generally grim.

Rolf Buerkl, consumer expert at GfK, said:

‘The recent dip in infection rates and the launch of the vaccination program are fuelling hopes of a speedy easing of measures. If, on the other hand, the measures are extended once again, the chances of a swift recovery will disappear and consumer sentiment will face further tough times ahead.’

GBP/EUR Forecast: Could a Dovish Outlook for the Eurozone Economy Drag Down the Single Currency This Week?

Pound investors will continue to monitor the UK’s Covid-19 situation and the speed at which vaccinations are being administered.

If Covid-19 infection rates continue to drop in tandem to the mass rollout of vaccinations, then GBP investors will become more confident about the UK’s staggered reopening in the months ahead.  

Tomorrow will also see a speech from the Bank of England’s (BoE) key policymaker, David Ramsden.

Any bullish comments about the outlook for the UK economy would be GBP-positive.

Euro traders will be awaiting tomorrow’s publication of the latest French GDP data for the fourth quarter.

If the outlook for the French economy deteriorates for the first quarter of this year, however, then the EUR/GBP exchange rate could fall.