The GBPEUR exchange rate saw new highs for the year last week as sterling continued its rally with the support of weaker Eurozone data. The UK is seeing virus numbers drop, with calls to reopen more quickly, while the EU struggles with high case rates and a gloomy second quarter outlook.
GBPEUR touched 1.1774 on Friday and the next target for the pair will be the 1.20 highs from early last year.
UK Travel Could Determine Spending Habits
The week ahead will see little on the economic data front and that will leave politics and headlines about lockdowns as the key driver. Boris Johnson has marked Monday to provide more information about when foreign travel could be allowed.
Speaking at a Downing Street press conference last week, Johnson said: “A lot of people do want to know about what’s going to happen on the holiday front and I know there’s a great deal of curiosity and interest. All I can say is it’s just too early to say and my advice is to everybody to wait for the global travel task force to report.”
He refers to the April 12th report from the global travel group and it begs the question why he is talking on Monday at all. That will likely be revealed, and it may be to update on vaccine passports.
Holidays were not to be allowed until 17th May under the lockdown roadmap, but higher case numbers could affect the number of possible destinations. Travel consultants have said that Dubai, Gibraltar, and Malta are possibilities, but the latter has said June before any visitors will be allowed.
For the GBP to EUR exchange rate, the travel issue matters because consumers will have record savings to spend when the economy opens up and it will either go to homegrown businesses or abroad.
Europe Talks Even More Stimulus
French Finance Minister Bruno Le Maire has joined the calls of Prime Minister Macron by saying that yet another ‘huge’ bout of stimulus would be good for the economy. Le Maire said on Thursday:
“Whatever we may think about it, the American stimulus plan shows ambition, and the return of U.S. ambition is a good thing. The best response to U.S. ambition isn’t to fight it. It is to match it. Europe needs to challenge itself like America does”.
The last ten years has seen huge stimulus measures and it failed to spark a real economic recovery in Europe prior to the virus. It looks more like an effort to keep the lights on and the Euro will suffer further this year if the economy remains in lockdown while governments splurge. The current 750bn euro stimulus package has faced a legal challenge from the German constitutional court and this has created concerns about possible delays.
The GBP to EUR resistance at 1.20 is in sterling’s sights and the economic data and reopening is supporting that path. If political headlines are supportive then the pound can gain further ground this week amid European gloom.
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