The pound to euro and pound to US dollar rate started the week well, following a positive week for sterling exchange rates last week.
The currency market is unpredictable at the best of times and the market appears to be driven by sentiment than merely economic data.
Whilst the world is currently still in the midst of the pandemic, a global recession imminent and with so much political uncertainty both in the UK and the continent we could start seeing a lot of movements on the pound to euro exchange rate in the weeks ahead.
The pound also made some gains following the positive news from the British Retail Consortium who confirmed that total retail sales rebounded by 5.9% in May after the huge fall of 19.1% in April.
There is little economic data due out for the UK this week until Friday morning which brings with it Trade Balance, Industrial and Manufacturing Production data as well as Gross Domestic Product (GDP) figures.
The expectation for UK growth is for a fall of just over 18% but this should come as little surprise as the lockdown was in place for the entire month of April. If the figure comes out similar to the expectation then we could see a busy end to the week for the pound vs the euro
Brexit negotiations have also started to come back into focus and things appear to be progressing albeit very slowly. The UK has continued to claim that it is not looking to extend the talks although they have the option to do so by the end of this month. EU Chief Negotiator Michel Barnier and David Frost have both claimed that the talks are developing but investors still remain cautious about the future of the pound.
In terms of up to date news from the Coronavirus, the UK yesterday reported a total of 55 deaths which is the lowest since Lockdown measures were first introduced the lockdown. However, owing to the lag in data from the weekend the Monday figures should always be compared to the previous Monday rather than the previous day. According to the records there were no reported deaths in London or the South of England and this news has prompted the government to consider reducing the current restrictions with Boris due to meet with the cabinet later on today. Therefore, the press conference could provide further clues as to what these lowering of restrictions could involve.
Euro Exchange Rates and Economic Data Today
During the last month the pound to euro exchange rate has been trading in a fairly tight range between 1.10-1.13. Economic data for both here and the Eurozone has been predictably poor, so it appears as though the negative data is cancelling each other out.
One factor that has helped sterling exchange rates both against the euro and the US dollar is when any lifting of restrictions has been discussed or announced.
Restrictions have already been eased in many countries across Europe so any signs that the UK will announce something later could potentially help the pound make some gains vs the euro.
At the height of the pandemic and prior to the UK’s lockdown measures, the pound fell to a 12 year low against the euro but has since bounced back trading at the higher end of the 1.12 range at the time of writing.
Yesterday ECB President Christine Lagarde soke with the European Parliament and suggested that further monetary policy could be actioned and that she is confident that the outstanding issue of the German Constitution Court could be resolved. This issue is still weighing on the value of the euro and could be one sticking point for euro exchange rates moving forward if this is not resolved.
Eurozone GDP data is due out this morning which is a revised figure of the first quarter of 2020, which could cause some movement for the euro depending on whether or not we see any change to the previous data. At the same time Eurozone employment change is also due out so be prepared to see some movement for sterling to euro exchange rates later on this morning.
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