GBP/EUR: Euro Slips vs Pound As Trade Wars Hit Germany
  • Quiet session expected for the Pound owing to public holiday
  • German IFO sentiment data expected to reveal a small lift in optimism
  • German GDP data expected in line with preliminary estimate
  • At 06:30 UTC, GBP/EUR +0.1% at €1.1183 >> Real time exchange rate

The Pound is trading quietly higher versus the Euro at the start of the week, in what is expected to be a relatively quiet session, given the UK public holiday.

The Pound versus Euro exchange rate came under pressure across the previous week on a broadly stronger Euro, closing the week -0.23% across the week at €1.1168.

At 06:30 UTC, GBP/EUR is trading +0.1% at €1.1183 as investors look ahead to German sentiment data.

The Pound slipped in the previous week following a slew of grim data. The UK claimant count, inflation and retail sales numbers all surprised to the downside. Service sector and manufacturing sector PMI’s were slightly ahead of expectation but still showed the sectors to be deep in contraction.

Looking ahead, this week is quiet for the Pound as far as economic data is concerned. Pound investors will continue to focus on coronavirus statistics. Should the R-rate show signs of easing further, hopes of the UK easing lockdown measures could underpin sterling. Prime Minister Boris Johnson is also under pressure after his senior aid violated lockdown rules.

Brexit will continue to limit any gains in sterling as the key June deadline draws nearer.

The previous week was a very important one for the Euro after sentiment saw a significant shift following the joint German – French plan for a €500 billion recovery fund to cushion the economic impact from covid-19.

The move helped dispel some myths and doubts over the EU’s ability to act in a crisis. The announcement has also taken the pressure off the European Central Bank to act, especially given that they are short on ammunition to start with. However, Austria, Denmark, Netherlands and Sweden are opposed to the plans, which include joint debt.

Looking ahead there are plenty of sentiment readings to move the euro over the coming week, starting with the IFO German business climate data release today. Analysts are expecting to see a mild improvement in sentiment.

Prior to the IFO sentiment data, investors will focus on German GDP data for the first quarter. This is the second reading and is expected to be inline with the first, with GDP falling -2.2% quarter on quarter.


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