GBP to EUR Pushes Higher After ECB Profit Drop

The GBP to EUR exchange rate has made a push above the key resistance levels on Thursday as the market reacts to an ECB statement of lower profit. UK retail sales will be the next data release on Friday. Sterling is continuing to see strength despite Boris Johnson’s cautious approach to lifting the current lockdowns.

The data into the weekend could spur some movement in the GBPEUR, but it will likely be the Prime Minister’s update on Monday, which gives real clarity on the exchange rate outlook.

ECB Profit Drops and May Hamper Growth

GBPEUR is trading at 1.1530 on Thursday after an ECB statement showed interest income from foreign-reserves were lower, while older bonds expired. Net profit at the ECB fell to 1.6 billion euros from a record 2.4 billion euros in the previous year. The decrease was largely driven by lower income from the bank’s US dollar portfolio and bond redemptions.

Bond prices across the Eurozone are close to record highs, while bank loans are slowing interest income. Regional central banks have warned that the ECB’s policies could depress their earnings this year.

Traders are also looking out for the ECB’s account of the January monetary policy meeting. The minutes of the recent monetary policy meeting may not give any new insight, but traders will be looking for hints of further stimulus or a move to negative rates.

The Bank of England has failed to note any concrete plans for monetary support and has pushed back any talk of negative rates, so the ECB could spur further sterling strength if they provide clarity on further monetary support.

2.6 Million in UK Expect to be Fired

Bloomberg has reported today that 2.6 million UK workers, which is 8% of the total, expect to be laid off in the next few months.

The figures include those who have already been made aware of their redundancy, with young workers and lower earners being the most at risk, according to the Resolution Foundation.

The Chancellor Rishi Sunak is likely to extend the furlough programme beyond the current deadline at his upcoming budget. The Bank of England has already forecast that unemployment could rise from 5% to 7.8% by the third quarter, bringing the unemployment numbers to over 2 million.

The numbers highlight that there is little chance of the furlough ending, while the Chancellor will also likely “go big” as analysts suggested earlier in the week. As the economy reopens, the government will want to mask the long-term destruction of the lockdowns until the economy is closer to pre-virus levels of productivity.

The GBPEUR is now trading at 1.1550 as sterling continues to be supported by current trends and Friday’s retail sales will be a precursor to Boris Johnson’s speech on Monday regarding the lockdowns.

Get in touch to discuss these factors and your upcoming currency exchange in further detail.

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