GBP/EUR: Pound Eases From 2020 High vs Euro

• The euro is showing signs of stabilizing after falling heavily this week versus its major peers
• GBP to EUR: Pound is consolidating gains after surging just shy of 1%

The pound is pausing for breath after a strong run versus the euro this week. Heading towards the end of the European session the pound has slipped 0.1% lower against the common currency at €1.2019.

Despite today’s small losses, the pound euro exchange rate has jumped over 2% this week on a combination of concerns over the health of the eurozone and the on hopes of an expansionary fiscal policy in the UK.

The euro is showing signs of stabilizing after falling heavily this week versus its major peers

The common currency has so far shrugged off disappointing GDP data. Data showed that the German economy stagnated quarter on quarter in the final three months of last year. Analysts had been more optimistic pencilling in growth of 0.1%.

Yet with industrial production and factory orders still falling, the manufacturing sector still in deep contraction and the potential impact on the coronavirus on the German economy still unknown, the outlook remains depressed.

Germany is a manufacturing and exporter nation. This means that it is more vulnerable to the coronavirus outbreak than the UK, for example. With this in mind, and the fact that the German economy is already very weak, the hit on German and the euro could be hard. Analysts suggest that euro investors will want to see a solid improvement in eurozone data before the euro starts to make any meaningful moves higher.

GBP/EUR: Pound is consolidating gains after surging just shy of 1%

The pound is consolidating gains after surging just shy of 1% in the previous session on hopes of more fiscal spending in the upcoming budget. The new Chancellor Rishi Sunak, who replaced Sajid Javid in the cabinet reshuffle, is expected to loosen the purse string taking the pressure off the Bank of England to cut interest rates.

The UK economic calendar has been quiet this week with just a raft of releases on Tuesday. Investors will now look ahead to next week which sees the release of UK employment data and inflation figures. Whilst analysts are expecting stronger wages, UK inflation has been lackluster. Still, with the prospect of higher government spending inflation could start creeping higher later in the year.

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