The GBPEUR exchange rate gave up 300 pips last week as large fund bets were unwound in sterling. The pair now has a busy week of data ahead, with Tuesday bringing a GDP update for February.
The GBP to EUR is trading at the 1.15 level on Monday morning and investors have pulled back on the UK’s cautious reopening, while there are fears over recent violence in Northern Ireland.
UK Growth Will Set the Tone For the Week
The pound versus the euro will start the week looking for political headlines and the GDP growth for February on Tuesday morning will be more important.
Analysts are looking for another loss of -1.9%, which would be in line with the previous month’s loss of -1.7% but there is some potential for a better figure after recent construction data and services PMIs. January’s GDP also had the headwind of a steep fall in exports due to Brexit paperwork delays. The GDP figure will set the tone for sterling in the week ahead, but there are other big releases from Europe.
Tuesday will bring the ZEW sentiment index updates from the European and German economies as business owners give their assessment of the coming months. These readings were more positive with the expectations for reopening but recent glitches in the vaccine rollout and additional lockdowns may hamper the recent figures. Later in the week we will also get Eurozone and German inflation updates, although the lockdowns will also put a lid on any price gains and this puts the focus on UK growth for the week.
The UK’s vaccination programme is expected to be completed this summer, according to Airfinity, which tracks programmes worldwide. The group claims that 75% of the population will be fully immunised in the UK by August. That would see it completed six weeks ahead of the EU’s own rollout.
An Airfinity spokesperson said: “The EU is also finally beginning to speed up too. But despite all the recent problems, the UK should still come out very well placed.”
Northern Ireland Rocked by Recent Violence
Violence has returned to the streets of Northern Ireland after a period of peace. Loyalist gangs have been leading the unrest with and some have been unhappy at apparent “soft” police treatment of lockdown breaches by nationalist politicians. There are other issues causing the unrest with the completion of Brexit leaving a vacuum for political instability and those conducting the violence have likely been on the receiving end of the virus lockdowns.
Boris Johnson now faces political headwinds as he seeks to reopen the UK economy and the recent issues over customs checks and other border issues will become more important.
The country will soon see lockdown measures eased and it remains to be seen whether that will ease tensions in Northern Ireland.
GBPEUR will look for support at the current level as it seeks to hold onto the recent bull market. This will hinge on tomorrow’s growth figures which could set up a rebound.
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