GBP/EUR hit highs of €1.12 this week but has since edged back to €1.11 thanks to this week’s slew of negative UK economic data.
Pound (GBP) Struggles as UK Government Borrowing Hits Record High in April
The Pound (GBP) has been edging lower against the euro this week following a run of concerning UK data. Tuesday, for example, saw the release of the UK claimant count report for April, which soared from 12.1 thousand to 856.5 thousand.
On Wednesday UK inflation fell to 0.8% – its lowest levels since 2016 – owing to the coronavirus pandemic.
Andrew Bailey, the Bank of England’s Governor, also failed to rule out imposing negative interest rates on the British economy. Mr. Bailey said, ‘We’re not ruling it in but we’re not ruling it out’.
Over in the Eurozone, meanwhile, Germany’s ZEW survey of economic sentiment for May beat forecasts and rose from 28.2 to 51.
Achim Wambach, the ZEW President, said that hopes were growing that there could be an ‘economic turnround from summer onwards’.
Thursday’s release of May’s flash Eurozone IHS Markit Composite PMI also showed a rebound from Thursday’s lows, although it remained firmly in contraction territory at 30.5.
Chris Williamson, the Chief Business Economist at IHS Markit, was relatively optimistic, saying that there were ‘reassuring signs that the downturn likely bottomed out in April’, as May’s results were better-than-expected.
The GBP/EUR exchange rate held steady on Friday despite UK government spending soaring to a worse-than-expected £61.4 billion in April. UK retail sales also plummeted last month.
GBP/EUR Exchange Rate Outlook: Could Improving German Business Sentiment Boost the Euro?
The Euro (EUR) could begin to edge higher on Monday if Germany’s IFO business climate report for May confirms forecasts and rises from 74.3 to 78.8. Additionally, German’s IFO expectations figure is also expected to rise to 75.
However, Tuesday’s publication of Germany’s GfK Consumer Confidence Survey for June is expected to remain low at just -18.8.
Meanwhile, Sterling traders will be looking ahead to Thursday’s UK GfK Consumer Confidence report for May. If this confirms consensus and sinks to -40, then we could see the GBP/EUR exchange rate fall.
The GBP/EUR exchange rate will also continue being driven by the UK’s coronavirus situation next week. Any signs that the coronavirus infection rate is dropping in Britain would prove Pound-positive as it would increase the odds of the UK’s lockdown measures being eased.
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