The GBPEUR exchange rate has bounced on Monday with the pair now trading at the 1.1500 level. The euro had pushed this lower in early reading, but traders are still cautious. There are big data releases coming for the European economy and this will lead the market in the week ahead.
GBPEUR will now pivot at the current level with the upside target being the 1.18 highs of early-April and the 1.128 level from 2020 being support.
UK retail gets a shot in the arm
Barclays has said that recent card data in the UK marked total spending as being 15% as the first week of ‘non-essential business’ spending got underway. Consumers have been spending at similar levels to the last lockdown release in summer of 2020.
Despite this, Google data was showing that footfall in the hospitality and retail sectors were 30% lower than before the pandemic.
A Barclays economist said that the figures will boost the economy and told the Telegraph: “High street clothing and footwear recorded an impressive jump, coming in well ahead of strong spring sales usually recorded between May and June. We are heartened by the impressive strengthening in consumer and business confidence in recent months, which bodes well for investment and employment.”
The reopening should see a bounce in hiring in these sectors and the economy is grinding towards a return to tourism and a boost for the travel sector.
European data will drive the currency pair
European data will be the key driver of the pound v euro this week with German consumer confidence on Wednesday. This won’t be seen as too important by traders, but a large deviation from forecasts could shift the exchange rate. The IFO business climate figures today were an example with a number that was 1 point below expectations and German sentiment is still struggling due to the virus case issue.
Thursday will be a big day for sterling versus the euro as the largest European country reports employment and inflation figures. A small dip in jobs and a 0.1% bounce is seen in prices due to the ongoing restrictions.
Growth will be a big event for the pair on Friday as Germany, Italy and Europe release Q1 flash GDP estimates. That will give investors a better idea of whether the European economy can match the growth estimates that has been set for the region in the year ahead. The UK has gotten a head start on reopening and that will play out in future releases, while the European countries may struggle to match previous visitor levels. Despite this, the return of US citizens to Europe is on the agenda for those that have received two vaccines.
The GBPEUR is hovering at the 1.15 level but the latter part of the week will be the big movement for the pair and there will also be a Federal Reserve interest rate announcement on Wednesday evening.