The GBP to EUR exchange rate saw a stronger close at 1.1721 as the pair moves back towards Monday’s high. Today will be a deciding factor with German unemployment data and Eurozone inflation set to be released.
GBPEUR trades flat in early trading at a price of 1.720 with the pound seeking another push to the 1.20 highs of last year.
European data to drive Wednesday action
The first data point this morning is a final read for the UK GDP in the fourth quarter. This is unlikely to affect the exchange rate as it should come in near expectations. Monthly updates have been seen for the start of 2021 and this should confirm the country’s UK performance.
German unemployment figures will follow, and markets are expecting a drop of -3k jobs, compared to last month’s gain of 9k. The previous month saw a beat on forecasts and there is potential for another improvement. The German unemployment rate is currently 6% and an improvement on this could see gains in the euro. The German economy has been stuck under lockdown restrictions, but the country’s manufacturing and exports have held up the economy. The rollout in vaccines may have brought extra hiring as business sentiment figures for Germany were higher recently, hinting at optimism in business owners for the rest of the year.
The core inflation rate for the Eurozone today is expected to be 1.1%. Germany released its inflation rate yesterday and this saw a jump to the highest level in almost two years. The German numbers are reflecting higher fuel prices and the end to temporary sales tax cuts.
The inflation picture could be a headache for central banks in the coming months once economies reopen. This will impact on their desire to keep interest rates locked at zero for another 1-2 years.
UK shop prices confirm retail gloom
UK shop prices were lower again for February in numbers released on Wednesday. This will come as no surprise after recent trends and the non-food sector was the worst performer due to the lockdown.
The British Retail Consortium saw prices falling 2.4% in March, which was worse than the 12-and 6-month averages of 1.8% and 2.0%. Non-food prices were 4% lower in March and the BRC said of the decline:
“This is the fastest rate of decline since May 2020”.
The damage done to the retail sector will continue to impact the economy and is another reason MPs want to Boris to drop his restrictions in full. A new survey from the Office of National Statistics said over 54% of Britons are now immune to the coronavirus due to the vaccine antibodies.
