Euro to Pound Rate Gains with Third UK Lockdown

The euro to pound exchange rate has snapped a three-day winning streak for the pound after the approval of Brexit. The British currency saw little follow-through from Boris Johnson’s deal and the country’s move into yet another government-imposed lockdown.

EURGBP was trading 0.11% higher in early trading on Tuesday at 0.9030 but the pair has seen a 100 pip from Monday’s open.

Third Virus Lockdown for the UK

Businesses in the UK are calling for further support after UK Prime Minister Boris Johnson plunged England back into another full lockdown because of the virus spread. Scotland was also pushed into another full lockdown.

The move has forced businesses in various sectors to plead with government for extra assistance to avoid business failures by extending tax reliefs and the furlough program. Britain’s retail and hospitality sectors are likely to be hit the hardest once more after Johnson forced all non-essential shops, restaurants, and bars to remain closed. Boris Johnson has now set his hopes on a plan to deliver 2 million coronavirus vaccinations per week in order to reverse the course of the virus.

The pound has seen a mediocre response from the approval of the Brexit deal but the ongoing virus problems are putting a heavy weight on the currency.

Germany Looks for Lower Unemployment

German jobs numbers this morning are expected to show a gain of 10k jobs versus expectations for -39k. Despite this, the unemployment rate is expected to stay stuck at 6.1% for Europe’s largest economy. A higher jobs number would boost the euro, but traders may be hesitant about the current lockdowns.

Tomorrow will see the release of inflation figures for the Eurozone with a print of -0.3% expected. This would see deflation persisting in the area and will worry the European Central Bank that the current euro rates are too high. Officials from the ECB commented last year that the euro was pushing the Eurozone into deflation and threatened currency intervention.

This will be important again now that the Brexit deal is signed and Europe will want to see their trading figures look good after the UK has left the EU. Monetary policy in 2021 is likely to factor this in and countries could see themselves caught in a trap of trying to outdo each other with larger stimulus measures to control their currencies.

Resistance for the EURGBP was at 0.9175 in the second half of 2020 and this would be the target if the euro wants to see further gains. For the pound, 0.8870 is the level that could open up some post-Brexit gains.

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