The GBP to EUR exchange rate was pulling back from Thursday’s strong close above the 1.1400 level. The pair is 0.13% lower on Monday and with no economic data to look at, a speech by ECB President Christine Lagarde is the only potential mover. That speech won’t happen until the end of the trading day so the market may be quiet.
GBPEUR was trading around the 1.1382 as investors pause from the BoE rate hold gains last week.
Lagarde Sees a ‘tricky’ Summer Recovery
European Central Bank President Christine Lagarde has already given some insight in a newspaper interview on Sunday. Speaking to French publication Le Journal du Dimanche, Lagarde predicted a summer recovery, saying:
“We remain convinced that 2021 will be a recovery year. The economic recovery has been delayed, but not derailed. People are obviously waiting impatiently for it.”
The central bank chief also said she was sure that the eurozone could come out of the coronavirus crisis stronger, with “a more digital and greener future.” Lagarde also hinted that the EU countries would soon see joint debts issued in the future.
Commitment to the stimulus was also noted, with a warning that the economic situation would provide a “tricky situation” for policymakers.
Ms Lagarde added that economies should not repeat past mistakes of drawing down stimulus too early.
“Economies will then have to learn how to function again without the help of any of the exceptional measures that had to be introduced as a result of the crisis,” she said.
The ECB President was also optimistic about her predecessor’s ability to restart the Italian economy and balance its debt problems. Mario Draghi spent eight years as head of the ECB and has now been selected by the country’s President to form a new government, likely at the orders of the EU itself.
Cancelling Virus Debts ‘unthinkable’
Another topic for discussion in the French paper was the cancellation of coronavirus debts for EU countries as some had called for. That would be “unthinkable” according to Ms Lagarde and a breach of the European treaty. She stressed that all nations would pay their debts back.
For the GBP to EUR exchange rate, it is clear that the European Union and its central bank will, indeed, have a trickier situation on its hands than the UK. The EU has 27 member states with different debt levels and interest rates, while the make up of those economies differs in areas such as import and export percentages. After the Greek crisis in 2010, it is obvious that the EU sees similarities in the Italian situation. The move to install Draghi is an attempt to control the financial situation above all else and to ward off any advances from the populist parties in the country that could threaten the stability of the bloc.
Many have questioned whether Italy would be the next to leave the EU and that will be seen when the dust settles and the stimulus is tapered down. To discuss the future of GBP to EUR exchange rates, and their potential impact on your future currency exchanges, get in tough using the form below and we’ll give you a call to discuss your requirements.