GBP/EUR Exchange Rate Edges Higher as Post-Brexit Fears Ease Off
The Pound to Euro (GBP/EUR) exchange rate is trading around €1.12 this morning, with the pairing up by 0.2% after it was confirmed that all UK retailers in England would reopen from 15th June.
However, Prime Minister Boris Johnson confirmed that hairdressers, pubs, and restaurants would not reopen until 15th June. As a result, Sterling traders are becoming increasingly concerned for Britain’s economy as we face another widespread closure of leisure and other non-essential services.
Post-Brexit concerns have also weighed on the Pound (GBP) this morning. This follows a key UK government minister saying that the UK would be confirming to the EU that it does not wish to extend the transition period beyond 31st December.
Nevertheless, Sterling has benefited from UK-EU trade negotiations committing to negotiating until the end of the year, meaning that fears over a disruptive Brexit have eased off for now.
Jonathan Portes, Professor of Economics and Public Policy at the School of Politics & Economics of King’s College, was more pessimistic:
‘Covid-19 pandemic and Brexit are major shocks for the UK economy. The interaction of the two is complex and unpredictable, with the potential to amplify some impacts while moderating others.
‘On balance, the pandemic probably does make the economic risks of exiting transition on January 2021 without a trade deal larger, but considerable uncertainties remain.’
Euro (EUR) Falls as French Industrial Output Suffers in April
The Euro (EUR) struggled this morning following the release of the French industrial output figure for April, which fell below forecasts by -20.1%. Consequently, single currency traders are becoming increasingly concerned for the Eurozone’s second-largest economy.
Meanwhile, today will see Louis De Guindos, the Vice-President of the European Central Bank (ECB), deliver a speech. However, any downbeat comments about the state of the Eurozone’s economy would prove EUR-negative.
EUR has since lost some of its gains after yesterday’s release of the Eurozone’s GDP report for the first quarter. The bloc’s growth beat forecasts, rising from -3.8% to -3.6%.
Overall, today is notably thin on Eurozone economic data, leaving many single currency traders speculating on the bloc’s battle against the coronavirus. Any signs of steady progress would reflect well on the EUR/GBP exchange rate.
GBP/EUR Outlook: Could a Gloomy ECB Drag Down the Single Currency?
Euro (EUR) investors will be looking ahead to tomorrow’s Eurogroup meeting. However, if this simply reiterates the ECB’s stimulus measures, it will have little impact on the single currency.
However, if the ECB shows any signs of downgrading its economic outlook for the Eurozone, we could see the single currency suffer.
The GBP/EUR exchange rate will continue to be driven by Downing Street’s actions regarding the Covid-19 lockdown. Any signs of further easing would prove GBP-positive.