GBP/EUR Exchange Rate Rangebound as Outlook for Eurozone Economy Deteriorates
The Pound to Euro (GBP/EUR) exchange rate held steady today after the European Central Bank (ECB) confirmed forecasts and held interest rates at 0%. The pairing is currently fluctuating around €1.16.
The ECB’s President Christine Lagarde, however, was more downbeat in her forecasts for the Europe’s economy, saying that it would likely shrink in the first quarter.
Lagarde commented:
‘Incoming economic data… point to continued economic weakness in the first quarter of 2021, driven by the persistence of the pandemic and the associated containment measures.
‘As a result, real GDP is likely to contract again in the first quarter of the year.’
As a result, EUR investors have become more cautious about the outlook for the bloc’s economy, which is largely expected to suffer from a double-dip recession this year.
The ECB also pledged to speed up its pandemic bond purchases and to accelerate stimulus measures to bolster the Eurozone’s economy in the months ahead.
Because of the European Union’s (EU) delay in rolling out Covid-19 vaccines earlier this year, single currency traders are becoming concerned about a drawn-out delay in the bloc’s recovery in the months ahead.
Pound (GBP) Steady as UK Covid-19 Rates Return to Focus
The Pound (GBP) held steady against the single currency today owing to a lack of notable UK economic data. Instead, UK markets are eyeing domestic Covid-19 developments.
Daily cases of Covid-19 continue to fall throughout the UK, with the figure down by -459 compared to last week. Daily deaths are down by -125 and those in hospital is down by -3,450 versus the previous week.
As a result, GBP investors are becoming more confident that UK coronavirus vaccinations are proving effective in holding back the numbers.
However, today saw concerning news about several key British retail outlets, including Morrison’s and John Lewis, which have both been heavily affected by the Covid-19 pandemic.
Consequently, GBP investors are notably more cautious today, despite growing confidence in the Government’s handling of the Covid-19 situation.
GPB/EUR Outlook: Could Strong UK Manufacturing and Industrial Production Boost the Pound?
Pound (GBP) traders will be looking ahead to tomorrow’s release of the UK’s Manufacturing and Industrial Production data for January.
Any improvement in the outlook for the UK economy, however, would be GBP-positive.
Tomorrow will also see the final GDP data for January, which is expected to fall by -4.9%.
In Eurozone economic news, tomorrow will see the release of Germany’s harmonised index of Consumer Prices for February.
Any indications that the Eurozone’s largest economy is struggling would be EUR-negative.
Tomorrow will also see the release of the Eurozone’s Industrial Production figure, which is expected to improve by 0.2%.
Consequently, we could see the GBP/EUR exchange rate begin to fall if the outlook for the Eurozone’s economy shows signs of improving.
Comments are closed.