GBP/EUR: Brexit and UK Inflation Affects Pound vs Euro
  • Health experts warned that Britain is easing lockdown measures too quickly and risks a second wave.
  • Pound (GBP) buoyed by Brexit optimism, Michel Barnier says a deal is still possible
  • Euro (EUR) loos to GFK confidence data, after German business sentiment shows strong signs of improvement
  • Pound Euro exchange rate (GBP/EUR) trades steadily at €1.1040

The Pound is mildly higher on Thursday, after drifting lower versus the Euro in the previous session. The Pound Euro exchange rate settled on Wednesday -0.3% at €1.1038, as it traded within a familiar range.

At 05:15 UTC, GBP/EUR is trading -0.05% at €1.1040 in a quiet start to the day.

Risk off was the theme of the day in the previous session, after health experts warned Britain that a second wave of coronavirus as coming as Prime Minister Boris Johnson continued to lift restrictive lockdown measures, at a faster rate than scientists would have liked.

Brexit remains a key driving factor, particularly ahead of another round of trade talks next week. EU Chief negotiator Michel Barnier has said that the ball is in the UK’s court now; Britain must send clear signals that it wants a trade deal. He added that a trade deal was still possible before the end to the year. This is offering some support to the Pound as investors have fretted over whether a trade deal was even possible on such a tight timetable and with coronavirus delays.

Looking ahead investors will focus on industry data from the Confederation of British Industry, a survey that looks at trends in the retail and wholesale distribution sector. Analysts are expecting to see an improvement from -50% to -34% month on month in June. Despite moving in the right direction this still reflects the impact of lockdown.

The Euro traded higher versus the Pound on Wednesday after German IFO data showed that business confidence in the Eurozone’s largest economy improved in June as lockdown measures were eased. The business climate index jumped to 82.6 in June from 79.7 the previous month. This not only beat expectations of 85 but was also the strongest increase ever recorded.

Meanwhile the current situation index printed at 81.3 in June, up from 78.9. All in all, the data shows that German businesses see light at the end of the tunnel.

Today, the economic calendar and particularly data from Germany will remain in focus with investors looking towards German GFK consumer confidence survey in July. Analysts are expecting to see an improvement from -18.9 in June to -12. Minutes from the latest ECB meeting could also underpin the Euro.


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