GBPEUR could see the pressure after Friday’s collapse
The GBPEUR exchange rate fell back below the 1.15 level on Friday to mark the fourth consecutive day of losses for the pound sterling. Highs near 1.1650 have been dropped and the British pound may come under further pressure this week after a second failure at these levels.
GBP / EUR is trading at 1.1475 early in the day for a slight gain of 0.05%. Germany released key economic data this week, while the eurozone will see its first estimate of GDP in the first quarter.
German and euro data to guide the week
Pound-to-Euro traders may have to wait until the middle of the week for a clear direction on the pair as the German economy sees consumer confidence ease. These numbers are analyzed in the context of lockdowns and case rates, so they’re not really driving the market, but any deviation will matter. That day will also see an interest rate decision from the US Federal Reserve and there is the potential for volatility in the market in general. Canada made a surprise move to gradually reduce its bond purchases last week, which could see markets move if the Fed signals something similar. This would put pressure on the ECB and BoE as they move towards reopening their own economies.
Thursday will be a big day for the GBP / EUR exchange rate with employment and inflation figures in Germany. Analysts expect inflation to rise 0.1%, while the job market is expected to post a labor loss of 2k due to ongoing lockdowns.
Friday is another big day for the single currency with flash estimates of GDP for the first quarter from Germany, Italy and the eurozone. This will be the main driver of sterling and euro rates over the medium term, as it will show whether the eurozone is on track to match growth estimates in a slow move toward reopening their economies. Core inflation for Europe will also be released on that day, but it is expected to remain stable.
American travelers return to Europe
American tourists who have been fully vaccinated against the coronavirus will be allowed to travel to the European Union this summer, according to the New York Times.
US travelers have been barred from non-essential travel to the EU for a year due to the pandemic. Many European countries see millions of American tourists every year and the current leak is hurting the tourism industry and employment levels. The United States has seen a strong deployment of vaccines and it is becoming clear that a two-tier system is emerging, with only the vaccinated being allowed to travel overseas to Western countries.
The EU’s vaccination program will have enough doses to cover 70% of adults by the end of July, according to European Commission chief Ursula von der Leyen. This is an improvement over the target of the previous September.
The GBPEUR could dip to the 1.14 test this week with higher support levels at 1.1280 which was a key level in the pound’s upside 2020 move.