The GBPEUR exchange rate rallied in the first three days of trading last week but the pair gave up some of those gains after a SAGE warning about the Indian flu virus variant and the potential to halt the June reopening target. The pound was stronger after the election results on Monday as the Tories secured strong gains and the SNP fell short of a clear majority. GDP numbers were also better than expected and boost the growth prospects for the UK.
GBPEUR saw its gains pull back towards 1.16 ahead of the weekend and UK employment figures will be the big release early next week.
Another loss for UK jobs?
The UK will see the release of the latest jobs numbers on Tuesday with expectations for another loss of -73k jobs. Analysts had said recently that the unemployment rate could actually be double the reported number and that the furlough scheme was propping up the jobs market.
The recent reopening has seen some green shoots of recovery for the hospitality and retail sectors and that could boost the jobs number, but it may be in the next two months before it filters through. European GDP growth figures for Q1 will also be released that day and it could guide the pair of the rest of the week.
The latest forecast is for a mild 0.1% improvement in European growth for the quarter to -0.6%, while the year-on-year figure is expected to be -1.8%.
Inflation keeps the heat on the pound v euro
Wednesday will be another big day for the pound v euro rate as inflation gets released for the UK and Eurozone.
This is important after a big wobble in US stocks last week, following the fastest CPI prices print in 40 years. This rattled investors after the Federal Reserve had assured them inflation will be temporary, however, some of the price rises are being driven by the shortages caused by the Suez Canal blockage, and the recent hack of a US gas pipeline.
German inflation came in at 2% last week and the ECB said that this was also a temporary issue, but it will be interesting to see the overall Euro number. The UK economy could be the headline after the country moved towards a reopening and this will mean that inflation could pick up faster in Britain and put pressure on the BoE.
Recent tensions between France and the UK will also be worth watching in the weeks ahead as the bitterness continues despite the Brexit agreement being signed only a few months ago. France is aiming to delay UK financial companies’ access to the European single market until it sees that the British government is keeping its commitments on fishing rights, according to Bloomberg.
The GBP to EUR rate has resistance at 1.18 and support at 1.16 ahead of the week’s key economic data releases.