- UK data has been mixed across the week, including disappointing GDP and upbeat inflation and jobs figures
- Pound (GBP) moves tentatively higher as Leicester eases localised lockdown
- ECB as expected made no changes to monetary policy
- Attention turns to EU leaders’ summit and whether they will be able to agree to the EU recovery fund
The Pound Euro exchange rate (GBP/EUR) is advancing on the final day of the trading week. The pair settled in the previous session +0.1% at €1.1025. At 05:15 UTC, GBP/EUR trades +0.1% at €1.1036.
The Pound is on track for weekly losses in the region of 1.2% after a mixed bag of data across the week. On the one hand UK GDP rebounded a disappointing 1.8% in May against expectations of a 5% jump. The data showed that the UK economy was still 25% smaller than in February.
However, on the other hand, UK inflation unexpectedly increased and UK unemployment remained steady at 3.9%. The number of people signing up for unemployment benefit even declined.
The unemployment rate will certainly start rising steeply over the coming months as the Britiah government tapers its support to the jobs retention scheme; a scheme which is currently supporting 9 million people.
Today there is no high impacting data although the easing of lockdown restrictions in Leicester is helping to buoy the Pound.
The Euro was trading lower across the board on Thursday after the “on hold” European Central Bank failed to impress.
As expected, the ECB left monetary policy on hold, with no changes to interest rates or the scale of bond buying. However, it said that it remained committed to buying trillions of euros in bonds until it considers that the coronavirus economic crisis has passed.
Christine Lagarde acknowledged the green shoots of economic recovery she also acknowledged that the unexceptional uncertainty was weighing on consumer spending and business investment.
Attention will now turn to the EU leaders’ summit to see whether the group can reach an agreement over the EU recovery fund. The so called frugal four, the Netherlands, Sweden, Austria and Denmark are opposing the Fund, which they want to be smaller than the €750 billion proposed and more cash hand out as loans rather than grants.
Doubts exist as to whether a deal will be reached, particularly after Austria’s EU minister Karoline Edtstadler said that she didn’t expect a deal to be reach at the summit this Friday and Saturday. The Euro could fall sharply on the disappointment at the start of next week.
