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GBP to EUR rate hits a fresh 13-month high

Pound to euro exchange rates have been in the financial news this week, after hitting the highest levels seen in over a year.

GBP-EUR rates have shown promising signs for those of our clients that hope to see the pound climb higher, as April is historically a strong month for the pound although it must be highlighted that past performance is never a true indicator of future price movements.

GBP-EUR hit 1.1756 on Monday, and although the rate has since dipped, I think the fact that the pair traded above 1.17 for much of the day is relevant, as prior to Monday we had seen the pair test the 1.17 level multiple times although on each occasion rates had fallen back below the 1.17 resistance barrier. The consolidation of the pair above 1.17 could be a positive indicator for GBP moving forward, and clients planning on converting pounds to euros around the current levels can do so safe in the knowledge that rates remain around 1-year highs. Monday’s move was a 13-month high, and we should not forget that just over 1-year ago GBP-EUR hit an 11-year low of roughly 1.05, and GBP-USD hit a 35-year low so sentiment has clearly improved towards the pound.

The reason for the gains appears to be improving sentiment towards both the pound’s true value, and also the potential for the opening up of the UK economy before many of its counterparts due to the successful roll-out of the Covid-19 vaccination process. Just yesterday a spokesperson within the City of London suggested that it expects the city to return to normality after the pandemic has ended, after the square mile has appeared like a ghost town for much of the past year once the seriousness of Covid-19 first became evident. The Lloyds Business Barometer was released yesterday morning and indicated that UK business confidence this month is the highest it has been for over a year, with staff returning to their jobs in high numbers. The number of new cases of Covid-19 has also dropped significantly in recent weeks which demonstrates the success of the vaccine rollout.

UK GDP data is to be released this morning which expectations of 1% growth during Q4, so expect any major deviations from this figure to potentially impact the pound's value.

Could the resurgence of EU Covid-19 cases push the euro lower?

A resurgence of Covid-19 cases within the EU has concerned financial markets, and this is being reflected within the value of the euro as the single currency continues to lose value against other major currency pairs.

The pound has gained by over 4.5% against the euro in just the past quarter, and the US dollar has gained almost 3% against the euro in the same time frame meaning that the purchasing power of the euro is losing value across many major currency pairs. Germany, which is the powerhouse of the EU as it makes the largest contribution to the trading bloc’s economic output is considering serious precautions to try and stem the tide of new cases. German Chancellor Angela Merkel has already had to back down from plans to have Germany enter a five-day hard lockdown at the beginning of April, but now she is planning to use federal authority to enforce measures to stem the surge in new Covid-19 cases.

Moving forward the concerns over the region are likely to have a negative impact on sentiment surrounding the economic bloc and therefore the euro’s value, so it could be further euro weakness as opposed to sterling strength that helps GBPEUR climb even higher.

To put the vaccinations numbers into context, as of the weekend only 10.8% of EU residents have received at least one dose of a Covid-19 vaccine, whereas 44.4% of people in the UK have received at least one shot.

Inflation data will be released this morning for March, with the data reflecting the entire EU bloc. The expectation is for a 1.3% Year on Year and could be followed closely due to the prolonged period of stagnating inflation within the region. This will be released at 9am this morning and if you would like to discuss any other potential market moving data releases please feel free to get in touch.

Busy end to the week expected for US data releases

As with every first Friday of the month, all eyes will turn to the US on Friday afternoon due to the volume of key economic data set for release.

Non-Farm Payrolls, which we highlight as a potential market mover each month will be released on Friday at 1.30 UK time. This provides the markets with a monthly update covering the number of new jobs within the US outside of the farming sector, and its watched very closely by financial markets as it provides an overview of job health within the worlds leading economy. The expectation is for 635,000 new jobs, which is up from the previous figure of 379,000 new jobs created during February. Any major deviations from this expectation can result in US dollar swings, so it’s worth being aware of no matter which currency pair you are interested in due to the dominance of the US dollar within financial markets.

At the same time, the Unemployment Rate for the US is set for release and is expected to come in at 6%, down from 6.2% which shows an improving jobs market within the US currently. If you would like to plan around either data release you have plenty of time to get in touch.

Cable, which is the colloquial term for the GBP to USD rate has dropped off recently, mostly owing to US dollar strength after falling from 1.42 down to around the 1.37 level where its currently trading at the mid-market level. Geo-political concerns regarding US relations with other foreign powers will have eased since the new administration took over, and this has benefited the US dollar despite some concerns within the US about the increased cost of living (fuel prices have spiked since the New Year).

If you have a price target for GBP-USD and would like to be alerted should your target price be hit, please feel free to get in touch so that we can set up a rate alert for you.

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