GBP/EUR: Pound Heads Higher As EU To Mull Over Brexit Extension
  • Pound (GBP) pares Tuesday’s losses
  • UK GDP Q1 third reading due to be released
  • Euro (EUR) resilient after surging consumer confidence
  • Eurozone CPI inflation in focus

The Pound Euro (GBP/EUR) exchange rate is rising on Wednesday rebounding from small losses in the previous session. The pair settled -0.1% lower on Tuesday at €1.1627 a mid point between the high and the low of the day.  At 05:45 UTC, GBP/EUR trades +0.10% at €1.1640.

The Pound came under pressure in the previous session as covid cases continue rising. The number of new daily covid cases hit 20,479 on Tuesday with 28 deaths recorded. The surge in cases owing to the more contagious Delta variant is starting to unnerve the markets. The government is still waiting to see if the rise in cases results in a higher death toll.

Attention will now turn to the latest reading of the GDP for the first quarter of the year. This is expected to confirm the -1.5% quarter on quarter contraction from the earlier reading. Whilst economic growth data is usually watched closely, this data is now quite dated, given that it relates to the January – March period and the second quarter is coming to an end.

The Euro was supported in the previous session after better-than-expected consumer confidence data. Eurozone economic sentiment hit a 21 year high in June. The measure for both business and consumer confidence jumped to 117.9 in June, up from 114.5 in May. The reading is well above the long term average and also came in ahead of analysts’ estimates of 116.5.

The rise in confidence was primarily driven by a sharp increase in confidence in the service sector as economies in the bloc reopened.

German inflation data was also in focus, printing in line with forecasts. German consumer prices rose 2.3% year on year in June. This was slightly down from the 2.5% recorded in May. On a monthly basis inflation also eased slightly, rising 0.4% compared to May.

Attention will remain on inflation with Eurozone consumer price index expected to reveal a slight slowing in inflation growth. Eurozone CPI for June is expected at 1.9% down from 2%.