• Pound (GBP) trades mixed versus majors
  • PSNB fell for the first time since the pandemic
  • Euro (EUR) supported by US Dollar weakness
  • German GDP was revised lower, IFO business sentiment surprised to the upside

The Pound Euro (GBP/EUR) exchange rate is edging a few pips higher on Wednesday after booking losses in the previous session. The pair settled -0.3% lower on Tuesday at €1.1550 towards the low of the day. At 05:45 UTC, GBP/EUR trades +0.05% at €1.1555.

The British government borrowed heavily again in April as it continued to support the labour market in order to aid the economic recovery. According to the Office of National Statistics, public sector net borrowing came in at £31.7 billion in April. This was above economists estimates of £30.9 billion, but comfortably below the Office of Budget Responsibility’s estimate of £39 billion. It was also the first monthly decline since the start of the pandemic.

The ongoing furlough scheme continues to make up a large part of the Government’s costs. However, there were signs of the scheme costing less suggesting that workers were re-joining the workforce.

There is no high impacting UK data due to be released today. Brexit jitters and covid developments will remain in focus.

The Euro found support in the previous thanks to the weaker tone surrounding the US Dollar. The greenback extended losses to trade at 4.5 month lows lifting the Euro despite mixed data from Germany.

The final reading of the first quarter GDP showed a downward revision to -1.8% contraction quarter on quarter, down from -1.7%. However, the market didn’t dwell on these numbers instead switch its attention to German IFO business sentiment figures which beat forecasts and hit a two year high.

The IFO business climate index rose to 99.2 in May, up from 96.6 in April. This was ahead of the 98.00 forecast. The improvement in sentiment comes as covid cases decline, the vaccine rollout picks up pace and as the economy eases lockdown restrictions.

There is no high impacting Eurozone data due today meaning that the Euro could be driven by movement in the US Dollar once again.