The GBPEUR exchange rate was still showing strength halfway through the Tuesday trading session, despite the latest Q4 GDP figures from the Eurozone highlighting improvement.
The GBP to EUR is up 0.33% on the day at 1.1364 and data this week could see the pound at 1.1500 if it can stay in a bullish posture.
Fourth Quarter Growth Boost for Europe
Data from the euro economy for the fourth quarter showed a lower-than-expected loss of -0.7%. The market was expecting a reading of -1% for the quarterly, but last week saw better numbers for France and Spain, while we also saw a small improvement for Italy. The collection of the bloc’s largest economies showing a bounce has improved the overall productivity.
Despite the improved growth numbers, the pound is still showing strength against the euro as traders look at the bigger picture. The GDP picture is largely priced into the exchange rate outlook and traders are adapting to the idea that the British economy could open up sooner than Europe’s. The country is moving ahead with 9 million vaccinations administered and this should put the UK economy on a good path, while the EU has had struggles with supply.
The GDP figures for Europe also showed a good bounce for France and Italy on the yearly numbers, rather than the quarterly. This could be a result of stimulus and 2021 may be a better indication of the sustainability in productivity.
The market is continuing to boost the pound rate and this trend will likely remain until tomorrow’s inflation rate. Europe is looking for a bounce to 0.9% after two months at 0.2%. This deflationary tone saw the ECB talk of euro intervention and this will determine the upside potential of the single currency.
Traders Have One Eye on the Bank of England
The GBP to EUR rate is unlikely to see big moves until the Bank of England announces their latest interest rate and policy on Thursday. The bank is unlikely to move on rates and stimulus after the signing of the Brexit agreement. The BoE Chief Economist Andy Haldane has also predicted a strong second quarter for the UK economy.
The key part of the event will likely be the latest quarterly outlook from the bank, and this will highlight the bank’s ideas on the economy and their thoughts on negative rates. The negative rate picture has been pushed out further after the recent events. The bank may actually be using talk of sub-zero rates as a tool to keep investors on the demand side for current 0.1% treasury sales.
The pound to euro rate is supported today and tomorrow’s EZ inflation number will determine where the rate heads into the BoE announcement.
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