The GBPEUR exchange rate surged to almost 1.1700 as traders gave Boris Johnson the benefit of the doubt in his reopening plan. The Prime Minister’s cautious approach may be overdone, but investors are betting on the UK to outperform the EU and there is also a budget coming next week that will likely double up as a stimulus plan.
GBP to EUR is trading at 1.1665 as the pair moves further towards the April 2020 highs of 1.2000.
Traders ignore employment for budget shot in the arm
Traders in the GBPEUR ignored yesterday’s woeful jobs number from the UK, which saw the unemployment rate rising again to 5.1%. The country lost over 100k jobs this month, despite the furlough scheme being in effect. Boris Johnson has hinted that they will not “pull the rug” on the economic revival hopes and investors are now looking ahead to Rishi Sunak’s budget on March 3rd.
The Chancellor’s budget will likely act as a veiled central bank stimulus package and this will give the UK a fiscal boost while other nations are still trying to catch up on vaccines.
The UK’s own vaccination program is set to slow with a short-term dip in supplies. The number of vaccines administered in the country dropped by 30% last week as ministers warned of a supply dip, which would ensure second doses are delivered within the 12-week limit.
The UK’s health secretary said that the country could expect “a quieter week this week” for vaccinations but predicted “some really bumper weeks in March.”
Reports have also shown that vaccine administrations are being complicated by citizens requesting a particular manufacturer’s vaccine. In Europe, health officials have noted missed appointments when the AstraZeneca vaccine is being administered.
German GDP grows faster than expected in Q4
Germany’s economy grew more than expected in the fourth quarter, according to data from Destatis on Wednesday.
GDP grew 0.3% in the fourth quarter compared to expectations for 0.1%, while the full year figure was also revised up to -4.9% from -5%. Virus spending programs in Europe’s largest economy have created a state budget deficit of 139.6 billion euros, which is the country’s first deficit since 2011.
Traders are ignoring the growth figures and are preferring to focus on the future path for growth. This is giving the pound a boost as investors price in the country’s reopening plan and a budget boost. Germany has been performing well in recent data for its manufacturing sector, but the Euro is reliant on 26 other countries for its overall GDP and this is curbing any gains.
The GBP to EUR exchange rate has resistance at the April 2020 highs of 1.2000 and the pair is slowly unwinding the Brexit risk premium that emerged since the referendum.