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GBP to EUR Slumps Ahead of Budget

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The GBP to EUR exchange rate has surrendered strong gains on the week to trade below the key 1.1500 level. Traders pushed the pair higher after Boris Johnson outlined his strategy for restarting the economy. Investors are now getting cold feet ahead of the budget next week and some profit-taking is spurring losses.

GBPEUR is trading at 1.1484 and without any big economic data ahead on the day, the pair may settle around this level.

Sunak to Target Pensioners With ‘Stealth Tax’

Wealthy pensioners are set to be a target in the upcoming budget with a “stealth tax” on pension allowances. Chancellor Rishi Sunak is to freeze the lifetime allowance in pension pots at just over £1million. Anyone who goes over that threshold will face a 25% tax on the savings, which can rise to 55% if they take out a lump sum.

Former Prime Minister, David Cameron has warned Mr Sunak not to proceed with his corporate tax increases. Cameron suggested that today’s climate was “very different” to the situation he inherited in the aftermath of the 2008 financial crisis.

“Piling tax increases on top of that before you’ve even opened up the economy wouldn’t make any sense at all,” Cameron said.

The Chancellor is reportedly looking to increase corporate taxes from 19% to 25% as he looks to balance the books after large virus spending efforts.

The director general of the CBI has urged Sunak to continue supporting businesses, especially those in hard hit sectors. Tony Danker said the Chancellor must “finish what he started” to back British business.

The GBP to EUR rate outlook will likely consolidate until the budget is clarified.

French Inflation Ticks Higher as Yields Blow Higher

Today saw a 0.1% tick higher in French inflation, which was slightly above expectations, but yields are starting to move globally as investors are getting nervous about inflation.

Central banks have outlined the second quarter of 2023 for the first move in interest rates but the markets are fearing inflation and there are risks bubbling beneath the surface.

US ten-year yields, which are seen as the benchmark for the global economy, have risen to 1.6% and this has seen a sharp sell-off in emerging-market currencies such as the Mexican Peso and South African Rand.

Central banks can’t afford to see yields rising at this time as it puts a squeeze on government interest payments. This is the reason for the zero percent interest rates, which has kept huge government debts in check. We can expect central bank action if the situation persists.

The GBPEUR has moved through support at 1.1500 and this will be the key level for the week ahead in the currency pair.

If you have an upcoming currency transfer and would like to learn more about GBP or EUR exchange rates, feel free to contact our team using the form below.

The post GBP to EUR Slumps Ahead of Budget appeared first on Pound Sterling Forecast.



Source: https://www.poundsterlingforecast.com/2021/02/gbp-to-eur-slumps-ahead-of-budget/


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