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Pound to Euro Exchange Rate Pushes Higher as Lockdown Easing Optimism Increases

European Central Bank

The Pound to Euro exchange rate is pushing higher this morning as the UK Government’s ‘roadmap’ out of lockdown restrictions is welcomed by markets and investors alike.

At the time of writing the pair are currently trading at around 1.1595.

Pound (GBP) Supported by Coronavirus Optimism

The Pound has been supported this morning after Prime Minister Boris Johnson announced the ‘roadmap’ out of the national lockdown, with life expected to be broadly back to normal at the end of June.

Speaking to UK television this morning, Health Secretary Matt Hancock said that he hoped the plan to ease lockdown restrictions would be ‘irreversible.’

He further commented on the plans, saying:

‘We want to be able to hit those milestones, but we will be vigilant and watch what’s happening to make sure it’s safe to make each move. The prime minister set out the four tests we will apply before announcing each move can go ahead.’

‘It’s on everyone … this isn’t just about choices the government makes, it’s important we stick to the existing rules.’

In UK data releases, this morning saw unemployment edge up to 5.1% in December the Office for National Statistics (ONS) reported.

Jonathan Athow, ONS deputy national statistician for economic statistics commented on the data:

‘Our survey shows that the unemployment rate has had the biggest annual rise since the financial crisis.’

‘However, the proportion of people who are neither working nor looking for work has stabilised after rising sharply at the start of the pandemic, with many people who lost their jobs early on having now started looking for work.’

Euro (EUR) Struggles Despite Positive Eurozone Inflation

The Euro has been struggling this morning despite a rise in core inflation for January in the Eurozone.

Core consumer prices increased to 1.4% from 0.2% the month before, however the rise in inflation was not enough to support EUR.

The Euro was down today as comments from the European Central Bank (ECB) President Christine Lagarde yesterday afternoon caused investors to be jittery.

Lagarde commented that the ECB are watching rising yields closely, saying that:

‘Within the broad-based set of indicators that we monitor to assess whether financing conditions are still favourable risk-free overnight indexed swap rates and sovereign yields are particularly important.’

‘Banks use those yields as a reference when setting the price of their loans to households and firms. Accordingly, the ECB is closely monitoring the evolution of longer-term nominal bond yields.’

Furthermore, the Euro remains down today as the US Dollar (USD) makes gains on rising US Treasury yields ahead of Fed Chair Jerome Powell’s speech later today.

Pound to Euro Outlook: German GDP in Focus

Pound investors will be looking towards Bank of England’s (BoE) Andy Haldane speech on the UK’s inflation outlook on Friday, with any hawkish commentary surrounding the economy supporting Sterling.

Euro traders will be focused on tomorrows German GDP growth data for Q4.

GDP growth is expected to have edged up to a modest 0.1%, hopefully helping the Eurozone’s largest economy avoid a double-dip recession.

The Pound to Euro exchange rate will also be moved by any further coronavirus developments, with cases continuing to fall signifying the start of economic recovery can begin.