GBP/EUR: Pound Heads Higher As EU To Mull Over Brexit Extension
  • Pound (GBP) supported by reopening optimism but political tensions drag
  • Northern Ireland’s First Minister resigns, Scotland looks to elections
  • Euro (EUR) weighs up weaker German confidence numbers against a weaker USD
  • Eurozone economic sentiment and German inflation data due

The Pound Euro (GBP/EUR) exchange rate is. The pair settled flat again on Wednesday at €1.1501 in another very quiet session which saw the pair trade in a tight range. At 05:15 UTC, GBP/EUR trades +0.14% at €1.1481.

In a quiet week for UK economic data, Pound investors are struggling between two opposing forces. On the one hand, reopening optimism is underpinning the Pound. On the other, political tensions within Britain are dragging on demand for sterling.

The UK continues to report around 2000 new covid cases a day and the number of first dose vaccines administered rose to just shy of 34 million. According to England’s Deputy Chief Medical Officer the broad expectation is that progress with the vaccine rollout should limit the damage from any third wave of covid.

Meanwhile concerns over political tensions in both Scotland and Northern Ireland are rising. According to investment bank Morgan Stanley, there is a 15% chance of Scottish Independence from the UK which Citi see it closer to 35%. Scotland holds elections next week where the issue of independence will be center stage.

Northern Ireland First Minister Arlene Forster has resigned. Pressure within her party has pushed her to step down, with many unhappy with how she handled Brexit and social issues.

The Euro also traded with mixed forces. On the one hand, worse than expected German GFK consumer confidence data dragged on demand for the Euro. Consumer morale unexpectedly fell to -8.8 points, down from -6.2 in April.

On the other, a weaker US Dollar following a dovish Fed meeting supported the common currency.

Looking ahead German inflation numbers and Eurozone consumer sentiment figures will be in focus. The closely watched Economic sentiment data indicator is expected to tick higher. However, after yesterday’s sudden decline in German morale a downbeat surprise could be on the cards.