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Pound to Euro Exchange Rate Falls as Markets Await UK Budget

Pound and Euro coins on a five-Pound note.

The Pound to Euro (GBP/EUR) exchange rate fell this morning as the UK’s excitement over the prospect of leaving lockdown runs out of steam.

At the time of writing the pair are currently trading at around 1.1543.

Pound (GBP) Awaits UK Budget as Lockdown Easing Plans Run out of Steam

Pound investors and markets alike are eagerly waiting for Chancellor Rishi Sunak’s spring budget tomorrow afternoon.

In lieu of any notable data today the Pound appears to be struggling as the excitement of lockdown disappears, and Sterling struggles to find any fresh support.

Although the UK continues to have a successful vaccine rollout, and more than 20 million people in the UK have now received their first vaccination, it doesn’t seem to be enough to push the Pound higher.

Furthermore, fresh worries over the Brazilian variant of the virus which has been found in both England and Scotland have caused investors to remain cautious.

Professor Christopher Fraser, from Oxford’s medical school said:

‘In Manaus, Brazil… that population had an incredibly high infection rate in the first wave, and yet was re-infected.’

‘What we don’t know is the degree of protection the vaccines provide against this strain… we have quite a lot of data that suggests we should be a little bit concerned on the possibility that it could spread.’

Euro (EUR) Makes Fresh Gains Despite Disappointing German Retail Sales

The Euro found fresh support today despite disappointing retail sales from the Eurozone’s largest economy, Germany.

Retail sales in Germany dropped 4.5 percent month-over-month in January of 2021, and way below market forecasts of a 0.3 percent drop.

“This decline can be explained by the ongoing coronavirus lockdown, which meant a closure of many retail stores since Dec. 16, 2020,” the statistics office said.

However, year-on-year inflation in the Eurozone for February was steady at 0.9%.

Some analysts expect prices to rise further, and inflation could exceed the European Central Bank’s (ECB) 2% target in the next few months.

The ECB is unlikely to tighten its monetary policy as the spike is considered temporary and inflation will likely fall again at the end of the year.

Pound to Euro Exchange Rate Outlook: UK Budget in Focus

All eyes will be on Chancellor Rishi Sunak tomorrow as he announces his spring budget for 2021, with the expectation that Sunak will extend measures like furlough to support those affected by the coronavirus pandemic.

Any hawkish commentary from the Chancellor surrounding the UK’s economic recovery following on from the pandemic will add fresh support to Sterling.

Euro investors will be looking towards tomorrow’s final Eurozone Services PMI for February, though expected to stay in contraction due to coronavirus lockdowns across the bloc if figures beat forecasts the Euro could be pushed higher.

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