The GBPEUR exchange rate was slightly higher in early trading on Wednesday, but the pair slipped again yesterday and could head lower as the 1.16 level gives way. The euro found some support after German GDP came in slightly lower than expected. A two year high for business sentiment in the country saw traders shrugging off the GDP dip.
The GBP to EUR trades at 1.1550 and could move towards the 1.15 level with no major data coming in the week.
European labour may lag behind economy
Europe’s labour market is expected to recover more slowly than its economy, according to a report by Accenture. The continent lost 3.5 million jobs in 2020, which may not come back until 2023, the company said, based on a survey of 700 executives. That would be a whole year after the EU economy is expected to return to pre-crisis levels.
A strong rebound is expected in Europe in the second quarter, but companies are afraid to hire after being scarred by previous lockdowns. The German economy shrank by 1.8% quarter on quarter and 3.1% for the year, according to the Federal Statistics Office yesterday. The numbers were expected to be -1.7% and -3% and Europe’s largest economy is lagging the European average, but the pound sterling can’t take advantage just now.
IFO business sentiment numbers did show a two year high in business confidence and the market is letting the euro catch up with the pound despite a gap in GDP.
UK pubs and restaurants boosted by soaring sales
Sales at pubs and restaurants in the UK soared this week as hospitality venues got a much-needed boost under the third phase of the prime minister’s roadmap out of lockdown.
Research by Dojo said 23% more restaurants were able to reopen on 17th May, compared to the previous week, with spending higher by 40%. Spending was also outpacing an average Monday in July last year by 12%. The reopening of indoor venues meant 67% more pubs were able to trade after being shut for the last five months. That led to a fourfold increase compared to average Monday trading, higher by 30% compared to July 2020.
“Hospitality has taken a big hit during lockdown and it’s great to now see restrictions slowly lift,” said Jon Knott, head of customer insights. “The data highlights just how many venues across the UK have not been able to seat customers outside, and so now they have the opportunity to welcome people back, potentially at full capacity.”
The reopening is a boost for the UK’s services-led economy and traders will want to cram punters in during the summer before the flu season returns, while the UK government is also applying measures to Indian variant hotspots.
The GBPEUR has resistance at 1.1500 but the pound’s failure to head back for the 1.18 yearly highs could see it punished in the weeks ahead.