The Pound to euro exchange rate has managed to begin its recovery against the Euro at the start of this week. Yesterday Bank of England Andy Haldane claimed that ‘roughly half of the roughly 25% fall in activity during March and April has been clawed back over the period since.’
With the government having announced further lockdown easing last Friday the UK economy is moving forwards trying to get people outside once again in an attempt to increase consumer spending.
Indeed, Chancellor Risihi Sunak’s plan to offer discounts in restaurants on Monday-Wednesday during August is also another way to encourage people to once again leave their homes. Many of the UK’s high street retailers have made redundancies owing to the lockdown and this is likely to have a knock on effect on unemployment in the months ahead. Therefore, this is why the government is trying to move things back to a more normal environment as soon as possible whilst observing Covid secure premises and social distancing.
Earlier this morning the UK announced its latest set of borrowing figures. The British government borrowed over £127bn during April and June in order to combat the effects of the Coronavirus on the economy. This was also over double compared to the previous tax year. However, the Pound has not been adversely affected as the borrowing for June compared to May was much lower.
According to the Office for National Statistics debt during June 2020 has reached 99.6% of GDP which is the highest in almost 60 years. However, as the UK economy has reopened once again this figure is likely to start falling relatively quickly, which is another reason for the Pound maintaining its value against the Euro.
We end this week with the focus turning back towards the Pound with the release of the latest set of UK Retail Sales data on Friday morning. This sector forms a huge part of GDP so depending on the release this could see a lot of movements for Euro Pound exchange rates so make sure you pay close attention to this release.
This will also be closely followed by manufacturing data for both the UK and the Eurozone for July so expect to see some movement on GBPEUR exchange rates during Friday’s trading session.
Euro Weakens Against the Pound
The euro has weakened against the pound since the start of the week providing some good news for anyone looking to buy Euros with Pounds. The Euro has fallen by over 0.5% against Sterling and almost 1% vs the US dollar as well.
During the last few days the European Union has been discussing how it will fund their COVID-19 package which sits at €750bn. Overnight the countries involved have finally come to an agreement as to how to fund the deal after days of disagreements. Indeed, this particular meeting was the longest on record in twenty years highlighting the issues between the various members of the bloc.
The funds will be provided in grants and loan across the continent but it still needs to be ratified by the European Parliament so although it was a step in the right direction it still needs to be concluded.
Some countries including the Netherlands, Sweden, Austria & Denmark were originally all opposed to the amounts proposed but have since backed down. It appears as though their economies have not been as negatively impacted by some of the other countries on the continent. Therefore, they originally had reservations of the deal. They have since backed down after French President Emmanuel Macron accused them of jeopardising the European project.
The lack of harmony appears to have had an impact on the strength of the Euro. In one way it is good that the talks have finally concluded. However, it does highlight that there is still a lot of differences politically and fiscally between the 27 member bloc.
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