The GBPEUR exchange rate moved higher to start the week with a 0.20% gain. The week ahead will be dominated by a mix of high-level German economic data. The UK will also release the latest employment figures for the British economy.
GBPEUR was trading higher at the 1.1260 level on Monday after a failure at the 1.1300 level last week.
German Data Starts the Week Off for the Euro
The pound to euro exchange rate will see the release of German IFO business climate numbers. The IFO index is a survey of 9,000 firms and gauges entrepreneur sentiment about the business climate. The reading is expected to show of 91.8 versus 92.1 last month. The index dropped as far as 74 in April but has recovered as German business owners feel more confident about the outlook. Sentiment numbers are not as important as they were before the virus due to the uncertainty and investors looking at the bigger events.
The German economy will see more data later in the week with consumer confidence on Wednesday, followed by inflation on Thursday and employment numbers on Friday. The latter two will be important because the German economy is expected to see a rise in employment and inflation. This could boost the euro if its largest economy starts to see an improvement. This will be in doubt with the ongoing lockdowns in the country.
Another driver for the GBPEUR rate will be the release of UK employment figures on Tuesday. The country saw a loss of -144k jobs in the last reading. Analysts are expecting another drop in jobs by -100k this time around. The pound has been hit by the jobs market as much of the country remains on furlough.
The reality for the developed economies is that even when the lockdowns are over, the jobs market may be slow due to the damage done to business structures.
Will Italy Leave the EU and Create More Chaos?
Italy could be the next country to follow Britain’s lead and exit the European Union according to a political commentator. Bruges Group Director Robert Oulds and Dr Niall McCrae told the Daily Express newspaper that the EU’s problems may not be over with Brexit finally sealed.
Dr McCrae pointed to the revolt against the lockdowns in some parts of Italy, which also saw policemen removing their helmets and allowing the flouting of lockdown mandates.
Italy has seen political problems in recent years with a changing leadership and an economy that was struggling badly ahead of the pandemic. The country’s banking system was a particular cause of alarm, but this will have been patched up by the ECB’s latest bond binge. The current Prime Minister saw his leadership challenged in the last two weeks, highlighting continued uncertainty in the country.
Once the Coronavirus clears up, the disparity between countries could play into the pound to euro rate. For the week ahead, the 1.1300 level will be key for sterling to see further strength. Get in touch to discus these factors in further detail, I’ll be happy to contact you personally and discuss your requirements.