The EURGBP exchange rate was trading at eight-month lows on Tuesday as the market awaits data from the Eurozone. The numbers will be followed on Thursday by the latest rate and monetary policy announcement from the Bank of England.
EURGBP is trading at 0.8818 and the pound could look to test the support at the 0.8685 if the BoE holds off on rates and further stimulus.
European Numbers Will Guide EUR to GBP Near-Term
Today will see the latest European and Italian GDP figures and this will guide the near-term path of the EUR to GBP pair. Italian GDP is expected to show a loss of -6.7% for the year, while the Eurozone figure is expected to be -5.4%. These may not diverge too far from analyst expectations, but last week saw improvements from France and Spain. A better release would be a boost for the Italian economy which is currently in the midst of political turmoil.
Inflation numbers from the Eurozone tomorrow will also be closely watched and the market is looking for a strong bounce to 0.9% from last month’s 0.2%. If the number does hit these expectations, it will see some of the ECB criticism of a strong euro fade and could boost the single currency.
The key event for the week ahead will be Thursday’s Bank of England announcement on interest rates and monetary policy. The bank is unlikely to make any changes to rates, while analysts expect them to hold off on any stimulus due to the removal of Brexit risk and a vaccine progress. Despite this, the Australian central bank just doubled their own stimulus while talking of a strong economy, so anything is possible.
Sterling Seeing Support from Vaccines
Last week’s drama in the Eurozone over vaccine delays and export controls is being countered in the UK with a fast rollout of shots. The country has now administered over 9 million shots with up to half of the 70s age group receiving a first dose. The UK is on track to be opening its economy far ahead of the Eurozone, but the pound is only seeing minor strength on this.
Britain’s Health Secretary is now suggesting that the UK has over 100 cases of the South African virus strain and the country’s promise of being opened in March may get side lined once more. The only bright spot for the pound in that scenario is that Europe usually follows and the vaccine trend is still in motion as the EU grapple to get vaccines for a program that has stuttered along in its key export countries.
The EUR to GBP rate has resistance at 0.8870 and the next support is at 0.8658. The economic data released this week should lead to one of these levels coming into play. To get in touch and discuss these factors in further detail feel free to use the form below.
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