GBPEUR Forecast: Sterling Rises on Boris Bounce but for How Long?

Pound to Dollar Rate Recovers Some Losses

GBPUSD has been struggling as the lock down continues and whilst a flattening curve develops with talk of an exit strategy, the economy is suffering badly. The pound is now trading at 1.2450, gaining 0.6 percent in this morning’s trading. Boris Johnson’s return to office has prompted investors to speculate about a possible easing of the lockdown measures.

UK Lockdown Easing?

The UK has reported its lowest daily death toll since March, but Dominic Raab has resisted calls to begin easing the current restrictions. Over the weekend, the daily death toll dropped to 413, which is less than half of the 857 that was recorded on April 8, the date which is assumed to be the UK’s peak. Raab noted that the government is still discussing how to end the lockdown in a safe manner. The government is sticking to scientific advice and keeping social distancing rules in place, whilst doing all the research to ensure the UK is prepared for the next phase. The public endured their 5th week of shutdown although it is clear, there is an increasing number of people leaving their homes. There has been a 4 percent increase in people driving and a 5 percent increase in people walking, according to Apple Maps Location.

Raab who has been acting as deputy prime minister has been reluctant to commit to any big decisions but with Prime Minister Johnson returning to office today, the pressure will mount on the government to produce its exit plan. Most expect the exit plan to be phased, initially allowing businesses that can open whilst maintaining social distancing to open, but businesses such as restaurants and bars remaining closed. The second phase could see travel restrictions eased but with strict checks at the borders to prevent the virus being brought into the country. There is also a big question over schools and when they will reopen, some suggesting that some classes could go back one week, with other classes to follow later, or perhaps rotate the classes.

Trump Battles Over Opening of US Economy

As coronavirus numbers in the US improve, Trump will place pressure on governors and states to ease current lockdown rules. Trump is desperate to restart the US economy, although advisers are cautious, as if restrictions are relaxed to early, it could trigger a second wave of the virus, which would deal a deadly blow to consumer and investor confidence. The US economy is expected to report an annualised contraction of 4.1 per cent for the first quarter of 2020 although this is only the start of the economic consequences caused from the crisis. On Wednesday, all eyes will be on Fed Chairman Jerome Powell in the Fed’s first meeting since they deployed mass stimulus. New figures for growth, employment, inflation, and interest rates could be published, but these will likely be gloomy and could depress investors.

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