The EURGBP exchange rate was trading flat in the Friday session after data from the UK failed to inspire any large movement.
The UK saw fourth quarter GDP beat estimates, but the economy also saw construction lower for the first time since the virus started.
EURGBP has seen a weak bounce at the 0.8750 level this week and could move lower if a catalyst favours sterling.
UK Beats Q4 Prediction Despite ‘worst annual fall’
The UK economy saw quarterly growth of 1% for the final quarter of 2020 according to the ONS. Market analysts had expected a gain of 0.5% for the fourth quarter but the actual figure was double that. This was helped by the monthly number for December, which also improved on projections, with a gain of 1.2% compared to 1%.
Despite the quarterly optimism, the economy still saw its “largest annual fall” on record according to the data from the Office for National Statistics. The British economy is still 6.3% below the pre-virus peak.
A strong construction rebound has also faltered in December, which is the first drop since a record 41% contraction in March due to the first lockdown. Monthly output was 2.9% lower in December as the third lockdown had an effect on the sector, but there was talk recently that thousands of companies could fail.
Red Flag Alert data warned that 40,000 construction firms were at risk of failure, with a threat to £2.2bn in unpaid invoices. ONS data for the sector saw that 13.6% of construction companies have “low or no confidence” that their businesses will survive the next three months.
This is the worry for the UK economy when the furlough system ends and government grants dry up.
Data Shows Hit to European Travel Industry
European Commission figures on Thursday showed that holiday nights in Italy, Spain and Greece fell by at least 70 percent last year, with the year ahead expected to be a quiet year.
“Tourism flows on the whole are not expected to fully recover to their pre-crisis levels in 2021,” the commission said. Visitors are expected to “only gradually return as uncertainty diminishes”.
The numbers are devastating for economies that are reliant on the sector, 21% of the Greek economy and 17% in Portugal relying on holidaymakers. The rollout of vaccines may see bookings improve and a removal of lockdowns in the UK could also have an effect but it is hard to see real freedom of movement for tourists in the year ahead, where many foreign destinations will be wary of large crowds arriving.
The EURGBP pair has support at the 0.8685 level but the latest data has failed to spur a move there and the market is obviously waiting for further clarity on the economic path. Get in touch using the form below to discuss these factors in further detail to see how your upcoming currency exchange is likely to be impacted.
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