- Reopening of UK economy lifts Pound (GBP)
- Brexit talks this week could limit gains
- EZ & UK manufacturing PMI expected to show activity deep in contraction in May
- At 06:30 UTC, GBP/EUR is trading +0.05% at €1.1126. Real time exchange rate
The Pound (GBP) has started the new week tentatively higher, after falling 3.55% versus the Euro (EUR) across the month of May. After opening May, a traditionally week month for sterling, at €1.1494, the Pound to Euro exchange rate settled on Friday at €1.1123. This was above the month’s low of €1.1045 struck on Friday, a level last seen in the third week of March.
At 06:30 UTC, GBP/EUR is trading +.0.05% at €1.1126 as investors look towards coronavirus crisis recovery hopes, Brexit and the European Central Bank’s monetary policy are all eyed. France and Germany are closed for Whit Monday.
Brexit will be back under the spotlight for Pound traders, and could cap any gains, as Brexit trade talks resume. There is rising concern over progress as the late June deadline for an extension to the transition period looms. If there is no agreement to postpones the transition period deadline lawmakers will have until the end of the year for a trade deal or risk a cliff edge Brexit, just as the UK economy is attempting to recover from the coronavirus hit.
One positive note, lock down measures easing is offering some support to the Pound. The gradual lowering of coronavirus infections and deaths has led the Prime Minister to allow some shops to return to business this week and all to start trading by mid-June. The move to reopen is slower than that in Europe.
The Euro has been in favour amid growing expectations of further fiscal stimulus in the bloc. Last week the European Commission announced an ambitious recovery fund, topping the French – German €500 billion program of grants with additional loans. The European Commission’s decision outweighed the frugal four’s protests. This is a group of four hawkish countries which wish to limit the EU’s aid, and borrowing. The Euro surged.
Covid-19 data has also been supportive of the Euro with numbers declining and the reopening of countries so far going well.
Looking ahead both UK and Eurozone manufacturing PMI data will be in focus. Analysts are expecting few changes from the last reading, with manufacturing activity across the board in deep contraction still expected to be closer to 40 on the index, than 50. 50 separates expansion from contraction.
