Home » EUR » Pound to Euro (GBP/EUR) Exchange Rate Steady, UK Government Borrowing Surges as Covid-19 ‘Severely Impacts’ Public Finances

Pound to Euro (GBP/EUR) Exchange Rate Steady, UK Government Borrowing Surges as Covid-19 ‘Severely Impacts’ Public Finances

European Central Bank

GBP/EUR Exchange Rate Rangebound as UK Retail Sales Recover in May

The Pound to Euro (GBP/EUR) exchange rate held steady this morning, with the pairing currently trading around €1.10.

Sterling held steady following the release of the UK’s Public Sector Net Borrowing figure for May, which surged to a higher-than-expected £54.499 billion.

Chancellor Rishi Sunak commented:

‘Today’s figures confirm that coronavirus is having a severe impact on our public finances.’

‘The best way to restore our public finances to a more sustainable footing is to safely reopen our economy so people can return to work.’

‘We’ve set out our plan to do this in a gradual and safe fashion, including reopening high streets across the country this week, as we kickstart our economic recovery.’

However, the Pound (GBP) benefited from a recovery in May’s British retail figures, which rose from -18% to 12%. As a result, GBP investors are becoming more optimistic about the UK’s economic recovery in the coming months.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, was however more cautious, saying that the ‘overall consumer picture remains bleak’.

Consequently, the GBP/EUR exchange has held steady today as investors remain cautious ahead of the weekend.

Euro (EUR) Steady as Germany’s PPI Fall Below Forecasts in May

The Euro (EUR) failed to gain on the Pound (GBP) today after Germany’s PPI figures for May fell below forecasts by -0.4%.

Investors have however been more favourable of the view that the Eurozone’s powerhouse economy could make a recovery. Nevertheless, many believe this will take some time.

Analysts at Reuters commented:

‘The German economy probably reached its lowest point in April, but a full rebound will take time even as the easing of coronavirus restrictions should quickly make up for some production losses.’

Meanwhile, EUR held steady after it was revealed that Eurozone banks had borrowed €1.3 trillion from the European Central Bank (ECB) via the lending facility.

Today also saw the release of the Eurozone’s seasonally adjusted current account figures, which fell to a worse-than-expected €14.4 billion.

Consequently, investors are becoming concerned as the flow of capital into the Eurozone continues to slip.

Pound Euro (GBP/EUR) Forecast: Could Weak UK Economic Data Drag Down Sterling Next Week?

Pound (GBP) investors will be looking ahead to Monday’s release of the UK’s CBI Industrial Trends Survey of orders for June. Any signs of improvement could benefit Sterling.

Meanwhile, Euro (EUR) traders will be awaiting Monday’s release of the Eurozone’s flash consumer confidence gauge for June. However, as this is forecast to fall to -24, then we could see the single currency suffer.

Tuesday will see the release of the flash UK Markit Services PMI for June. If this falls below forecast, then we could see GBP suffer as the UK’s largest sector buckles under the pressure of Covid-19 restrictions.

The GBP/EUR exchange rate could suffer next week, however. Any further signs that the UK’s economy is struggling amid the coronavirus pandemic would prove Pound-positive.