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Euro Pound Exchange Rate Edges Higher as German Downgrades Covid-19 Risk Level

Euro Pound exchange rate outlook

EUR/GBP Exchange Rate Rises on ‘Grounds for Optimism’ for Europe’s Reopening

The Euro Pound exchange rate rose by 0.4% today after Germany downgraded its Covid-19 risk level, buoying confidence in the recovery of the Eurozone’s largest economy. The pairing is currently fluctuating around £0.86.

The Euro (EUR) benefited from the German government’s downgrading of the nation coronavirus risk to ‘high’ from ‘very high’.

German health minister Jens Spahn said that the Government now has ‘grounds for optimism’ thanks to the nation’s rollout of Covid-19 vaccines.

In Eurozone conomic data, today saw the release of the latest Eurozone unemployment rate figure for April, which fell below forecasts from 8.1% to 8%.

Andrew Kenningham, an economist at Capital Economics, said that hiring is expected to ‘increase substantially’ once lockdowns ease.

Kenningham added:

‘Firms will be able to draw on furloughed workers, so we don’t expect the unemployment rate to come down rapidly this year’.  

The latest Eurozone manufacturing PMI also rose along with German factory data in May.

As a result, Euro traders are becoming more hopeful about the Eurozone’s economic recovery in the months ahead.

Chris Williamson, the chief business economist at IHS, commented on the report:

‘Eurozone manufacturing continues to grow at a rate unprecedented in almost 24 years of survey history, the PMI breaking new records for a third month in a row. Surging output growth adds to signs that the economy is rebounding strongly in the second quarter.’

Pound (GBP) Exchange Rate Falls despite the UK’s Zero Covid-19 Deaths

The Pound (GBP) fell today despite Prime Minister Boris Johnson’s reiteration that there is currently no evidence to merit delaying the June 21 further and final easing of UK lockdown measures.

Business minister Paul Scully said that there was ‘cautious optimism’ that the date would go ahead as normal.

Scully said:

‘One thing that we saw last year, before Christmas, was the stop-start nature just didn’t work for businesses and cost them more. So we’ve got to get it absolutely right. People’s jobs and livelihoods depend on it.’

Today also saw zero daily Covid-19 deaths. This means that there have been no new deaths related to coronavirus within 28 days of proving positive.

As a result, GBP investors are now more hopeful that low death rates could further encourage the Government to ease lockdown measures later this month.

EUR/GBP Exchange Rate Forecast: Could Rising Hopes for June’s Easing of Lockdown Measures Boost Sterling?

The Pound (GBP) could rise this week if the Government maintains its commitment to further ease lockdown restrictions on June 21.

If the UK Covid-19 death toll remains low, then the Pound could quickly claw back its losses against the single currency.

In UK economic data, tomorrow will see the release of the latest mortgage approvals for April.

Any signs of improvement in the British economy would bolster the GBP/EUR exchange rate.

Euro (EUR) traders will be looking ahead to the European Central Bank’s (ECB) President Christine Lagarde’s speech.