- Pound (GBP) falls on risk aversion
- Brexit continues to dampen demand for GBP ahead of talks later in the week
- Euro (EUR) looks ahead to ZEW Sentiment data tomorrow
- At 05:15 UTC Pound Euro exchange rate (GBP/EUR) trades -0.3% at €1.1105
The Pound is extending losses at the start of the week, after dropping 0.7% versus the Euro across the previous week. The Pound Euro exchange rate settled on Friday at €1.1142 after 4 straight sessions of declines.
At 05:15 UTC, GBP/EUR is trading -0.3% at €1.1105 ahead of a busy week with both the Bank of England rate decision and the European Union summit.
Coronavirus remains a key issue as the British covid-19 curve flattens at a frustratingly slow rate. The government is only taking baby steps to reopen the UK economy. Prime Minister Boris Johnson is under increasing pressure, particularly after GDP data showed a worse than forecast 20% contraction in May. The pace at which the covid curve flattens is crucial to moving forwards towards the next stages of easing lockdown. As a result, coronavirus statistics will remain under the spotlight.
Brexit continues to dampen demand for the Pound as talks are deadlocked. Chief EU negotiator Michel Barnier said that the UK was looking for all of the perks of EU membership without any of the obligations. This highlights the distance than remains between the two sides. Meanwhile the British government has reaffirmed that it will not the requesting an extension to the transition period.
Whilst there is no high impacting UK data today, investors will look ahead to a busy week, which includes UK labour market data, inflation, retail sales and the Bank of England policy announcement.
The Euro pushed higher across the previous week. Data for the bloc was broadly mixed with German industrial production figures significantly worse than forecast, whilst the Eurozone GDP for the first three months of the year beat expectations.
investors will keep an eye on the Eurozone economic calendar this week. Whilst eurozone data last was related to April and May, when strict lockdown measures kept economic activity paralysed, some data this week is June data, which could attract a bit more attention. For example, on Tuesday ZEW Sentiment data for June will be closely watched, allowing investors to gauge how the recovery is progressing
Later in the week the EU Summit will dominate with both Brexit and the recovery fund expected to be discussed in depth.
