GBPEUR Awaits EZ GDP and German ZEW Data

GBPEUR Sinks on UK ‘Freedom Day’ Shambles

The GBPEUR exchange rate was slightly lower on Tuesday ahead of another estimate for Q1 GDP in the Eurozone. German ZEW economic sentiment figures will follow for the Eurozone’s largest economy.  The focus for the week is the European Central Bank meeting on Thursday.

The GBP to EUR trades at 1.1620 after a quiet Monday for the pound and euro.

Data will lead but markets look to headlines

The European economy will see a final estimate for Q1 GDP with markets expecting a loss of -0.6% for the quarter. That will be followed by the latest German ZEW economic sentiment release.

The outlook for both figures has improved with a reopening of the economies, but there is still a focus on the headlines as changes in the virus outlook could alter the path ahead.

UK faces £2.5bn debt problem

The UK economy will face long-term negative effects from the pandemic unless the government and banks tackle £2.5bn of rent debt.

Thousands of businesses have benefited from a moratorium on rent debt which was built up since March last year and prevents landlords from pursuing tenants for arrears.

Kate Nicholls, chief executive of trade body UKHospitalitysaid in a statement to MPs that the rent moratorium, which will end later this month should be extended to avoid insolvencies.

“We currently have £2.5bn in historic rent debt which is going to fall in one hit on 1 July, when the moratoriums end, so we urgently need those extending,” was the warning.

The property debt issue highlights the underlying damage to the economy caused by the lockdowns. The labour market is also being propped up by the extension to the furlough program.

ECB won’t budge on Thursday

The European Central Bank will meet on Thursday but are likely to stick to their current ultra-loose monetary stimulus. This will be co-ordinated with the US Federal Reserve.

Despite a strong US economic rebound much higher inflation figures than in the euro zone, Federal Reserve officials have hinted that they won’t slow bond buying purchases at their own meeting a week later.

Dovish policy makers at the ECB, such as Fabio Panetta claim there’s no reason to slow down the pandemic bond-buying programmeace of around 20 billion euros a week.

 

More-hawkish members such as Bundesbank President Jens Weidmann have avoided the topic, while President Christine Lagarde insists the ECB will maintain stimulus until well into the economic recovery.

The UK economy will also see another 3-month average for GDP this week, with Friday’s release giving traders further fuel for the next path of the GBP v EUR exchange rate. The pound has been rising on the country’s growth prospects, but the real issue is the date of the reopening and whether the forecasts will be hit by virus cases.

The pound sterling versus euro pair is still holding the 1.16 support set in early April, with the late-April lows providing support under 1.15.