The GBPEUR exchange rate rallied last week but the pair is still trading under the 1.17 level and has not advanced much in two months. The pound has failed on numerous occasions to retest the 1.18 yearly highs, but traders are still supporting the pound. The UK is seeing a dip in virus cases and that should support sterling in the week ahead with a light economic calendar.
The GBP to EUR now trades at 1.1680 and could leap higher towards the April highs if the UK reopening holds out.
Javid under fire as cases drop for a fifth day
Britain’s health minister Sajid Javid apologised for a tweet urging people to take a vaccine and not to “cower” from the virus, with the minister saying he had made “a poor choice of word”.
Javid only replaced Matt Hancock as health minister a few weeks ago after his predecessor stepped down for breaking restrictions. Britain has one of the highest virus death tolls but has lately shifted its strategy from using lockdowns to opening up society in the hope that vaccines will provide further herd immunity.
Javid’s gaffe came as the UK reported a fifth-straight day of lower virus cases. The number of coronavirus cases has dropped to over 29,000 infections. The number is down from Saturday’s 31,800, but is falling sharply from over 46,000 infections a week ago, according to official Government data.
The pound versus the euro should see further support from the drop in virus numbers and this will be the key story around some economic data.
Germany see IFO business climate figures on Monday
The German economy will see the release of IFO Business Climate numbers in the latest sentiment survey of businesses. The figure is expected to rise to 102.1 from 101.8 but traders are often looking beyond these projections if restrictions are being placed over virus cases.
Friday saw manufacturing figures higher again with the German sector printing a 65.6 reading compared to analysts’ expectations for 64.2. The manufacturing sector has flattened out in recent months but is still performing well. The services PMI number was also higher at 62.2, with analysts expecting a 59.1 reading.
Last week saw the pound higher after the European Central Bank rate meeting, where the bank adopted a more dovish tone and re-affirmed that higher inflation would not mean an imminent end of stimulus measures. Economists are not expecting a rate hike for Europe until Q1 2024, which means stimulus will likely run until the end of 2023 at an average pace of €5.5bn per month.
The week ahead is light for UK data with only mortgage approvals numbers on Wednesday, while the following day will see German employment numbers and inflation. The reversal of the VAT changes are expected to see inflation leap to 3.2% in the economy.
The GBP versus the EUR rate will now hinge on the same 1.17 level that has held prices for two months.
Read More: GBPEUR Stuck in Familiar Territory Near 1.17