The Pound is holding steady, consolidating losses on Wednesday after diving lower across the previous session. The Pound versus Euro exchange rate settled on Tuesday at -1% at €1.1302 after hitting its lowest level in almost three weeks.
At 06:15 UTC, GBP/EUR is trading +0.05% at €1.1304 as investors look ahead to UK GDP reading.
GDP -8% MoM
The Pound was the worst performing currency in the previous session, after Chancellor Rishi Sunak extended the furlough scheme until October as the coronavirus crisis continues. The impact that this will have on economic activity lead analyst to believe that the Bank of England (BoE) could ease monetary policy again in the coming months. The central bank’s policy maker Ben Broadbent confirmed such fears saying that more easing was possible.
Investors will look ahead to a slew of data due for release in the European session. The releases include GDP data for the first quarter, trade balance and Industrial production for March.
UK GDP reading will be the most closely watched macro data point. Analysts are predicting a -8% contraction in economic activity month on month in March as the lockdown started. Quarter on Quarter, analysts are forecasting a -2.5% contraction.
Running alongside the coronavirus crisis and macro data are Brexit talks which have also been exerting a downward pressure on the Pound. With the June deadline fast approaching, the Pound could see volatility over the coming weeks.
EUR: Germany R Below 1
The Euro was in demand across the board on Tuesday, advancing despite growing fears of a second wave of coronavirus infections hampering efforts to reopen economies. Germany has been at the centre of the concerns as the transmission number, R, had been over 1 for three days. This means that the number of infections is growing. Today, the number of infections has increased again, although R is back below 1.
Investors will look ahead to the release of industrial production data. Analysts are forecasting a -12.1% decline month on month in March, down from -0.1% decline in February. On an annual basis industrial production in the region is expected to drop -12%, down from -1.9% as demand dried up and factories shut. A weaker than forecast reading could raise concerns further over the economic hit of the coronavirus outbreak.
