The GBP to EUR exchange rate saw a sharp drop on the week after touching the 1.1800 level on Monday in thin Easter trading. The latest record high was in anticipation of the UK roadmap being loosened on the recent vaccination and virus figures, but traders arrived on Tuesday and sold the Pound after Boris Johnson refused to budge on foreign travel.
The GBP to EUR closed the week around the 1.1540 level for a more than 200-point loss for the week.
PMI and Construction Figures Fail to Lift Sterling
Wednesday saw the UK posting strong PMI services data for the month of March. A reading of 56.4 was 0.2 lower than expected but it was still far ahead of the figures from the major European countries. The pound couldn’t take advantage despite the services sector being the most important aspect of UK GDP.
The biggest weight on sterling was an unwind in leveraged fund bets, according to CFTC futures data. Hedge fund bets on sterling had reached the highest level in over a year and this always leaves the currency at the mercy of bad news.
Construction figures on Thursday were also good with the UK seeing its best construction increase since 2014 as the market has escaped the worst of the lockdowns.
The Bank of England saw a new female appointment to the monetary policy board on Friday with former Bank of Canada senior deputy governor Carolyn Wilkins replacing the vacancy opened by the departure of Donald Kohn. Wilkins will sign up for a three year term, which will start on June 21st- the same day as the UK is set to fully reopen.
Euro Gets the Benefit of the Doubt on Vaccines
The Euro currency was higher this week as traders gave the EU the benefit of the doubt on vaccines. Spain received its largest delivery of vaccines and the bloc as a whole is ramping up their administration of doses to try and close the gap on the UK.
The British economy is still ahead on this front and the IMF upgraded the UK growth outlook from 4.4% to 5.3% on the count of the vaccine delivery and the recent emergency spending announced by Chancellor Rishi Sunak. This included the extension to the furlough program announced through to October.
The European Central Bank released their latest monetary policy meeting minutes on Thursday, and they said that the risks for the economy were more “balanced”. The bank also said they would accept higher bond yields if they followed growth increases but would intervene on any adverse moves before then. This removed fears of imminent stimulus from the ECB.
The GBP v EUR exchange rate has seen the technical outlook change and the pound’s march to the 2020 highs at 1.20 has been derailed. The path forward will now be about finding a floor of support and trying to get back towards that level, but the timeframe has moved further out. Get in touch to discuss these factors in further detail ahead of your currency exchange involving pounds to euros.