EUR to GBP Outlook Rests on Today’s Sunak Budget

The EUR to GBP exchange rate was 0.19% lower in early trading on Wednesday but the pair is inside the recent price range and looking for the Chancellor to determine the path ahead with today’s budget in Parliament. Rishi Sunak will deliver his second budget at 12:30pm before taking questions in a 5pm press conference.

The EURGBP saw a low of 0.8540 last week as traders reacted to Boris Johnson’s reopening plan. The bounce that followed in the euro has defined the 0.8700 level as resistance for further gains and the budget will likely see one of them broken.

Furlough Wage Scheme to be Extended

British finance minister Rishi Sunak will deliver his second budget in Parliament today and it will be a tough job to help the economy recover from its worst economic performance in 300 years, while also convincing bond markets that spending is under control.

The Chancellor is expected to extend the country’s wage furlough scheme to October in today’s budget. Boris Johnson said last weekend that they wouldn’t “pull the rug” and the unemployment situation is too fragile for them to expose after a rise in unemployment to 5.1% last week. Self-employed workers will also see 80% of their profits paid, while over half a million ‘excluded’ workers who didn’t qualify previously will get support.

The current VAT cut will be extended for hospitality and tourism firms, while it could also be extended to pubs now that the Brexit red tape has been removed. There will be other support measures for areas such as youth employment, but the task for Mr Sunak is to plug the hole in the country’s finances from the £400bn in borrowing that governments have spent.

The balancing act will define the path ahead for the EURGBP in the weeks ahead.

German Unemployment Gains

Yesterday saw a surprise gain of 9k jobs in Germany against expectations of a -14k loss. Europe’s largest economy has been showing strength despite the ongoing lockdowns as its manufacturing economy is less stressed by the country’s lockdown.

The Eurozone also released core inflation numbers, and this came in as expected at 1.1% as prices move higher. The OPEC+ group meet this week and are expected to increase production rates after a surge in oil above $60. This could lower prices again and that would filter through into the inflation readings. Central banks will be happy to see oil lower after last week’s bond market moves.

The EU’s 27-nation vaccine rollout is splintering as states turn to outside options to boost the flagging rollout. Austrian Chancellor Sebastian Kurz said on Monday that he plans to work with Israel and Denmark on future vaccine production after the EU saw supply issues, arguments and slow uptake.

The EUR to GBP direction for the next few weeks will depend on today’s budget and how it relates to the Prime Minister’s reopening plan. All eyes will be on Rishi Sunak as he attempts to pull a rabbit out of the hat after the UK’s worst GDP drop in 300 years. Get in touch to discuss the budget today, and the potential ramifications on the EUR to GBP rate ahead of your currency exchange.

The post EUR to GBP Outlook Rests on Today’s Sunak Budget appeared first on Euro Rate Forecast.