GBPEUR Makes an Early Rally on Monday

GBPEUR Showing Weakness Despite Strong Data

The GBPEUR exchange rate was 0.50% higher in early Monday trading as the pound shrugged off the political uncertainty of last week. The SNP scored big wins in the Scottish election but the Conservatives held their own against Labour and traders are aware that the Prime Minister will not allow a Scottish referendum, while the appetite is not necessarily there for another vote.

The GBP to EUR bounced to the 1.1550 level again as investors absorb the growth prospects for the UK with GDP ahead.

EU data leads UK GDP update

Monday may be a quiet session after the early bounce, with only Halifax house prices released, but tomorrow will see numbers from the European economy with ZEW economic sentiment index readings from the Eurozone and its largest economy, Germany. The German reading is expected to show a very small uptick as lockdowns persist, but the continent is moving closer towards reopening.

Germany will feature again on Wednesday with an important inflation number for April. Last month saw a print of 1.7% and this month is expected to come in at 2%. The inflation numbers are creeping higher for the developed economies and this is during lockdowns. Once things reopen then we could hear more about inflation in the investment world.

An update for British GDP will follow for March and this may not be as important after the Bank of England upgraded its growth outlook last week to 7.2%, with the UK expected to see its pre-virus activity levels before the end of 2021. A small deviation on the growth number will not move the pound to euro but it should be a busy day.

Friday will bring the next ECB monetary policy meeting minutes and again, this may not be a big driver because the European Central Bank have telegraphed their desire to keep rates and stimulus measures in place for the foreseeable future and are unlikely to follow the recent tapering move by the BoE.

Australia deals a blow to UK green list hopes

The Australian treasurer Josh Frydenberg told reporters on Sunday that the Australian borders will remain shut until 2022. This is a little embarrassing for the UK after the country made its newly published ‘green list’ of countries that UK travellers can visit without quarantine requirements. New Zealand also made the UK’s list and it is not certain that they will keep their borders open for very long either. Other countries on the list are: Brunei, Iceland, Israel, and Singapore. The only European nation to make the list was Portugal and bookings will soar for that country. The list is set to be reviewed every couple of weeks but the UK is likely to see a boost in “staycations” which will boost the pound as consumers spend their money at home, while it will cause continued damage to the tourism sector in Europe.

The GBPEUR will look to move towards the 1.16 level after the latest bounce but it may be midweek before any real traction.