The Pound is moving lower in early trade on Friday, snapping a two-day winning steak. The Pound Euro exchange rate settled on Thursday +0.1% at €1.1317, after picking up from the session low of €1.1273.
At 06:30 UTC, the GBP/EUR has slipped back below €1.13 trading -0.2% at €1.1298. The pair is on track to have lost 1.3% across the week, pairing gains from the previous week.
GBP: Grim Figures From OBR
The Pound is trading on the back foot after the Office of Budget Responsibility reported that the UK budget deficit will soar to £300 billion this year. This equates to 15.2% of GDP, the highest level of borrowing since World War 2.
The actual figure will in fact be higher as the current estimate doesn’t include the extension of the government’s job retention scheme, which has so far cost £70 billion through to the end of July. This week Chancellor Rishi Sunak announced the extension of the furlough programme until October.
The OBR predicts that the UK economy will contract 35% in the second quarter of this year whilst unemployment will rise to 10%
There is no high impacting economic data due for release today. Data this week has been in short supply but hard-hitting leaving investors pessimistic over the outlook fort the UK economy. UK GDP shrank -5.8% month on month in March, and -2% quarter on quarter.
EUR: Germany GDP -2% Expected
The Euro is advancing as investors look ahead to the release of German and Eurozone GDP data for the first quarter. Analyst are expecting -2.2% economic contraction quarter on quarter in Germany, a level not seen since 2009. In the final quarter of 2019, German GDP recorded 0.4% growth.
Germany went into lockdown at the end of March, meaning that the economic standstill was only for the last 8/9 days in March. However, China is Germany’s largest trading partner and China suffered a deep economic downturn in the first two months of the year due to the coronavirus outbreak,
Analysts expect the German economy to suffer a much deeper contraction in the second quarter of -10%. A weak reading today could add pressure to the Euro.
