The GBPEUR is lower on Friday after a bout of profit-taking ahead of the budget on Wednesday. Traders are taking a step back from the pound’s rally on the expectation of a second quarter. Boris Johnson’s cautious path to reopening has ensured it will be a late second quarter bounce, but a slower vaccine rollout and Chancellor Merkel’s “third wave” warnings have limited the euro strength.
GBPEUR came close to hitting 1.1700 on the week but that is unlikely today. The pair may consolidate around this level with the 1.14-1500 levels in play.
Will the Chancellor Boost the Pubs Industry?
The UK Chancellor Rishi Sunak will deliver his latest budget on March 3rd and there is hope that the hard-hit pubs could be one of the big winners. Prime Minister Boris Johnson was asked during PMQs if the Chancellor had freedom over beer duty and replied:
“There is just such a review being carried out after consulting pub owners and brewers and others, and I know that the Chancellor is looking very closely at the findings.”
While Britain was still part of the European Union, the Government was unable to extend its VAT rate cuts to alcohol sales.
The British Beer and Pub Association (BBPA) has now said that pubs and brewers could be in line for a £130million boost if the Chancellor acts on his post-Brexit freedom.
Chief executive of the group, Emma McClarkin said: “The existing VAT cut on food and soft drinks does nothing to help those pubs who rely on beer sales… it’s important to remember that seven in ten of all alcoholic drinks sold in pubs are beer.”
The extension to the cuts would be an easy one for Rishi Sunak and could earn him favour in the sector, while his government has seen very little income from the sale of beer due to pubs being in constant lockdown.
Tame European Data Rounds off the Week
The day saw French inflation numbers 0.1% higher at 0.4%, while Poland’s GDP came in as expected with a -2.8% loss year-on-year. The numbers were the end of a thirty-year growth streak for Poland, when the economy was going through a transition from centralization to free markets in 1991. Economists are now looking for an economic rebound in the second quarter in the country and the signing of the Brexit deal was important for Poland’s hauliers.
Next week sees the Italian government budget on Monday, alongside German inflation. The bond markets are moving higher on the risk of higher inflation so a beat to the 1.1% expectations could rattle the EURGBP.
Germany is centre stage again on Tuesday with unemployment and the Eurozone also adds to the inflation numbers. This will set the stage for Rishi Sunak’s Wednesday budget.
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