The GBP to EUR exchange rate has seen a mixed performance with sterling gains early in the week giving way to selling on Friday. The pound has rallied with the UK government’s success in vaccinating over four million of its population in recent sessions, but higher inflation gave way to weak retail sales. Traders have now paused in their bullish approach to the pound until further information appears. The week ahead will see the latest employment data for the British economy.
GBPEUR was trading at 1.1238 at Friday’s close after a failure at key resistance above 1.1280.
European Countries Extend Travel Bans
Several nations in the European Union have extended measures to limit new travel or entry. Belgium, France, and Portugal were among those countries restricting nonessential trips across the bloc’s borders.
Travel into the EU is already under heavy restrictions and beginning Sunday January 24, anyone arriving into the EU requires a negative COVID-19 test. Germany’s Chancellor Angela Merkel has also been pushing an EU-wide ban into the UK this week. Merkel told a virtual meeting of leaders:
“We will for the first time, talk to the European heads of government and state about the mutation and we will certainly have the common goal to curb this virus, which means there will need to be special measures, I think they all agree, regarding travel from Great Britain”.
The continuation of lockdown measures will add to the confusion over the GBP to EUR outlook. Boris Johnson has suggested that the latest strain of the virus is more deadly and there is still no sure date for exiting the restrictions.
Mixed Data and Policy Outlook Add to Caution
Last week saw a mixed bag of data from the Eurozone and UK economies. Inflation figures showed a continuation in the trend of higher UK inflation and weak Eurozone figures. This will put a lid on any potential for big euro gains as the ECB would step into block it.
The UK saw weak retail sales data last week and it underlined a gloomy December for the sector. This week will see the latest economic data for the UK and the pound to euro exchange rate will focus on that figure this week.
Last week’s ECB meeting saw the central bank hold back on any further rate cuts or stimulus measures. This comes on the back of the Bank of England also showing no plans for imminent changes due to the Brexit deal being signed.
With no additional stimulus coming, the exchange rate will move back to focusing on the near-term implications of the virus. The UK had an early lead on the EU with its vaccination attempts and this could see the British economy opening up more quickly in the coming weeks or months.
GBPEUR could move to test support near the 1.1100 level over the coming week until the data picture is clearer. You can get in touch using the form below to discuss these factors and their impact on your upcoming currency exchange.