GBP/EUR Exchange Rate Rangebound as France Falls into Recession
The Pound to Euro (GBP/EUR) exchange rate held steady today, with the pairing currently trading around €1.14. Meanwhile, Euro (EUR) investors are awaiting today’s European Central Bank (ECB) interest rate decision. However, this is expected to hold at 0%.
If the ECB announces further stimulus measures to bolster the Eurozone’s economy, we could see the single currency edge higher.
However, the Euro (EUR) struggled to gain on Sterling this morning after France fell into a recession. French GDP contracted by a record -5.8% in the first three months of 2020.
French statistics body INSEE said the slump in growth was ‘primarily linked to the shut-down of ‘non-essential’ activities in the context of the implementation of the lockdown since mid-March’.
Meanwhile, Euro investors will be awaiting today’s publication of the Eurozone’s flash GDP report for the first quarter.
However, if this considerably falls below consensus and pushes the bloc deep into recession territory, then would see the EUR/GBP exchange rate slump.
Today also saw the release of Germany’s Unemployment Change data for April, which soared to a worse-than-expected 373,000.
Ulrik Harald Bie, an economic editor at Berlingske, commented:
‘German unemployment increased from 5.0% to 5.8% in April. Labor market is supported by extensive use of kurzarbeit, but unemployment is set to increase further. However, Germany has fiscal means and willpower to support growth substantially later in the year.’
Pound (GBP) Steady Despite Growing Concerns Over British Economy
The Pound (GBP) also struggled today over growing concerns for the British economy. This follows news that the UK Lloyds Banking Group collapsed in the first quarter – and losing nearly 95% of its profits – after the bank was forced to take £1.4 billion to cover a surge in bad debts.
António Horta-Osório, the Lloyds chief executive, commented:
‘The coronavirus pandemic presents an unprecedented social and economic challenge which is having a significant impact on people and businesses in the UK and around the world.’
As a result, Sterling traders have become increasingly worried that the UK could slump more deeply into a recession than previously expected.
Meanwhile, today will see Prime Minister Boris Johnson update the nation on ‘steps to defeat’ the coronavirus.
Any hints at a possible easing of lockdown measures would prove Pound-positive.
GBP/EUR Forecast: Could Sterling Rise on Easing UK Lockdown Restrictions?
Pound (GBP) investors will be looking ahead to tomorrow’s final Markit Manufacturing PMI for April. If this falls below forecasts, we could see Sterling as anxieties over the British economy rise.
Meanwhile, the Euro (EUR) will continue to be driven by coronavirus developments this week. Additionally, if there are any signs that other nations could ease their lockdown measures would boost hopes for the Eurozone’s economy in the near-term.
The GBP/EUR exchange rate will be driven by the UK’s coronavirus response. However, if there are any signs that the Government could ease its lockdown restrictions, then we could see the Pound rise.