GBPEUR Could See Volatility with European GDP

GBPEUR Giving Up Inflation Gains Before Jobs Data

The GBPEUR exchange rate has seen a fourth-straight day at the 1.15 level, with the pair seeing no inspiration from the latest economic data. That could change today with the release of GDP from Germany, Italy, and the Eurozone. The recent euro data has all been subdued by lockdowns, so the growth figures will help traders price the next path for the exchange rate.

The GBP v EUR saw highs of 1.18 in early-April and the bigger support level would be at 1.1280 if a new trend takes place.

German inflation highest in two years

Yesterday saw the release of German unemployment numbers, which showed a rise of 9k jobless claims. Markets were expecting a drop of -10k in the unemployment figures and the rate stayed at 6%.  The economy is still struggling with the restrictions and high case levels in recent weeks.

Germany saw its inflation moving above the 2% level due to rising energy costs. The reading marked the first time in two years that the level had been breached. Consumer prices were higher by 2.1% in April, up from 2.0% in March.

The ECB have been expecting a rise in prices with the bank’s Vice President Luis de Guindos saying that inflation will be higher than 2% by the end of the year. Central banks are keen to say that these prices are “transitory,” yet the economies are largely closed and still seeing price pressures.

The GDP figures will add more weight to the debate as lower-than-expected growth would imply some stagflation. The European Central Bank President Christine Lagarde had said that they would allow bond yields to move higher if it was based on GDP. If inflation comes with the reopening, then it may force their hand to step up their bond buying. These scenarios can add volatility to the GBP v EUR in the coming months and the Bank of England will likely face the same dilemma.

Northern Irish Prime Minister Resigns

The recent violence in Northern Ireland has now added the resignation of the country’s Prime Minister to the political risk.

Arlene Foster will quit as the leader of the Democratic Unionist Party on May 28th, and as First Minister of Northern Ireland at the end of June, after a revolt by politicians in the country. The next election is not expected until May next year and could see a power shift with Sinn Fein trying to take advantage. The DUP supported remaining in the UK, but the recent upturn in violence is a worrying sign after years of peace.

Today also marks the next phase of reopening for Northern Ireland with restaurants and bars set to open their doors once again. The economy in the smallest UK constituent is only £46 billion and is the reason that the currency rate holds firm despite the political turmoil.

GBPEUR will move on the latest GDP figures with markets looking to see if the Eurozone can meet the expectations that have been set for its rebound.