EUR/GBP Exchange Rate Rangebound as Lockdown Fears Haunt European Markets
The Euro to Pound (EUR/GBP) exchange rate held steady today and is currently fluctuating around €0.85.
Euro investors are becoming increasingly cautious after several key German doctors have called for an immediate lockdown to avoid a third-wave of Covid-19.
Christian Karagiannidis, the director of Germany’s intensive care register, commented:
‘From the data we currently have and with the spread of the British mutation, we would argue strongly to return immediately into a lockdown to avoid a strong third wave. We won’t gain much from staying open for the next one or two weeks, because that will quickly bring us to a high level and make it twice as hard to push the numbers down again.’
As a result, EUR traders are becoming increasingly concerned about the outlook for the Eurozone’s economy, for if Germany – the bloc’s largest economy – undergoes another lockdown, the economy will suffer.
Consequently, demand for the single currency has fallen today as fears of extended lockdowns will limit the extent by which the Eurozone can recover this year.
Pound (GBP) Steady on Bullish BoE Forecasts for the UK Economy
The Pound (GBP) held steady against the Euro (EUR) today following bullish comments from the Governor of the Bank of England (BoE) Andrew Bailey.
Mr Bailey said that the outlook for the UK economy was now exceeding the Bank’s forecasts.
‘We now have a more balanced picture of risks… The risks on the upside are that there has been a very large build-up in savings in the economy, largely because people have not been able to do the things they normally do.’
Today also saw UK business confidence jump to its highest level since 2015, fuelled by the UK’s speedy rollout of coronavirus vaccines.
Pollyanna De Lima, economics associate director at IHS Markit, commented:
‘Optimism towards business activity and employment has strengthened on the back of COVID-19 vaccine rollouts and hopes that social distancing and travel restrictions will end.
‘Firms intend to expand operating capacities by replacing staff laid off due to the pandemic, amid efforts to cope with expected increases in new work. In particular, we’ve seen notable rebounds in sentiment towards output and jobs across Europe.’
EUR/GBP Exchange Rate Forecast: UK Economic Confidence Could Continue to Buoy Sterling This Week
Euro (EUR) investors will be awaiting tomorrow’s publication of the German ZEW Survey of the Economic Sentiment figure for March.
Tomorrow will also see the release of March’s Eurozone ZEW Survey Economic Sentiment figure.
Any further deterioration of economic sentiment in the Eurozone’s economy would be EUR-negative.
The GBP/EUR exchange rate could continue to head higher this week, however, if the outlook continues to improve for the British economy.