GBP to EUR at a Crossroads as Traders Seek Clarity

GBP EUR Higher Ahead of ZEW Sentiment Data

The GBP to EUR exchange rate is at a crossroads after closing on Friday at a key resistance level. The pound has gained against the euro since late-December, but traders are hesitant about making any large bets on the pair.

GBPEUR closed the week at 1.1284 and a move higher in the pound could see the pair heading for the 1.1500 level, but investors need a catalyst.

Data Fails to Provide a Spark for GBPEUR

The GBPEUR pair has seen a large amount of data releases in the last week, but traders have not seen anything that changes their current expectations. The UK economy saw mixed employment figures with a lower loss of jobs than expected. The number came in at -88k after analysts had projected -144k, but this still led to a 1% move higher in the employment rate. Unemployment in the UK is at its highest since 2015 and this is being masked by the ongoing furlough scheme.

German employment figures later in the week had a similar tone with a higher loss of jobs than expected, accompanied by a dip in the country’s unemployment rate. The German economy also saw inflation bounce back, while GDP figures from Spain and France showed some promise. These data points from the Eurozone are helping to add some support to the euro as the pound threatened to break out on the vaccine race.

Euro Pressured by European Vaccine Crisis

The single currency was under pressure from an ongoing vaccine crisis in the Eurozone. Recent delays from the drug maker AstraZeneca led to tension between the EU Commission and company executives. Europe then threatened to block the export of Brussels-made vaccines, leading to cries of “vaccine nationalism” in the UK press.

Britain is moving ahead of the Eurozone with over 7 million residents already getting a first dose of the virus vaccine and the country has the potential to open up more quickly if the trend continues. The UK has already vaccinated over 11% of its population. EU nations such as Italy, Poland, and Germany have only administered vaccines to around 2-3% of its citizens. This could be a driver of the GBP to EUR exchange rate outlook, but investors are still a bit hesitant to jump on this.

In Britain, the government is reporting that the data is going in the right direction with numbers of daily cases, hospitalisations and fatalities going down, according to official statistics.

Next week sees inflation numbers from the Eurozone with markets expecting a reading of 0.9%. This would be a welcome boost for the ECB after months of deflationary activity. The Bank of England are also set to announce their latest interest rate and monetary policy decisions.

Like the ECB, they are unlikely to make any changes as central banks await the data from the current lockdowns and the path of the virus.

Get in touch to discuss the next interest rate decision and the potential impact on your currency exchange in the short term.