GBP/EUR Exchange Rate Climbs Near Yearly Best Again as Eurozone Outlook Remains Gloomy
The British Pound to Euro (GBP/EUR) exchange rate has been able to recover after a couple weeks of poor performance after investors continue to shunned the single currency amid concerns about the Eurozone’s third coronavirus wave.
Investors are buying the Pound Sterling (GBP) again as the outlook for Britain’s economy is still optimistic, despite recently mixed UK data,
After opening last week at the level of 1.1610, GBP/EUR spent the week with highly mixed and volatile trade.
In the middle of the week, GBP/EUR touched on a low of 1.1568 – the worst level for the pair in a fortnight.
However, GBP/EUR then rebounded from those lows and surged higher towards the end of the week, ultimately trending high in the region of 1.1711. This was around the best GBP/EUR levels in a year, since the beginning of 2020.
For most of the past week, the Pound was kept under pressure by fresh uncertainties in Britain’s economic outlook.
UK-EU post-Brexit trade tensions ramped up over coronavirus vaccine shipments. UK inflation fell short of forecasts too, dampening hopes for a more hawkish Bank of England (BoE) any time soon.
Despite some disappointing UK data throughout the week though, the Pound’s performance steadied and improved a little towards the end of the week.
What’s more, the Eurozone indicated it would not attempt to interfere with coronavirus vaccine shipments. This relieved investors and helped the Pound to strengthen again.
According to Kallum Pickering, Senior Economist at Berenberg:
‘The economic wheel of fortune seems to be turning back in the UK’s favour. A successful vaccine rollout, aggressive policy support and a solid global backdrop set the stage for at least two years of rapid economic rebound from the massive pandemic shock of 2020,
We expect a strong consumer-led recovery from spring onwards as savings normalise, face-to-face services re-open and manufacturers step up production to meet rising demand,’
In comparison, the Eurozone’s outlook remains gloomy. Analysts note that the Eurozone’s vaccine rollout is still slow, and the past week’s Eurozone data has not been particularly surprising.
Comparison to more optimistic outlooks for UK and US economic recovery has left the Euro in the dust for now.
Pound (GBP) Exchange Rates set to Remain Supported by UK Coronavirus Vaccination Success
The Pound saw a bit of a shock last week, but the British currency’s outlook remains fairly optimistic overall.
Analysts still expect the UK economy will continue to recover from the coronavirus pandemic at a better rate than other major economies. This is keeping the Pound broadly appealing overall.
While Sterling may lack the drive for fresh gains, it will likely hold its ground compared to a weaker Euro.
Sterling could hold its ground more easily if upcoming UK data impresses investors.
Monday will see the publication of UK housing data. UK business investment and growth rate results from Q4 2020 will follow on Wednesday.
Then, Thursday will round off the week’s notable UK data with Markit’s March manufacturing PMI results.
If key UK data such as growth or manufacturing beat forecasts, they could keep investors optimistic about Britain’s economic outlook and support continued Pound strength.
On the other hand, surprisingly weak data could further dampen the Pound’s recent appeal and cause GBP/EUR losses next week.
GBP to EUR Near-Term Forecast: Key German Data and Coronavirus News Could Boost Outlook
As the Eurozone outlook remains fairly gloomy, it could take a notable improvement in the Eurozone’s coronavirus situation for the shared currency to strengthen considerably.
If the Eurozone’s vaccine rollout shows more signs of improving or the infection rate improves, this could help the Euro to strengthen.
Signs of resilience, strength or recovery in upcoming Eurozone data could also boost demand for the Euro.
Tuesday will see the publication of Eurozone confidence data and German inflation stats. German unemployment figures and Eurozone inflation will follow on Wednesday.
Then, Thursday could see some of the week’s most influential Eurozone data in the form of Germany’s February retail sales, and Markit’s final March manufacturing PMIs for the Eurozone.
Of course, if Eurozone data fails to be particularly impressive and the bloc continues to recover more slowly than the UK or US, the Euro could remain weak and the Pound to Euro exchange rate could continue to trend near its best levels.