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EURGBP Looks for Support Despite German Lockdown

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The EURGBP exchange rate was flat in early trading on Monday but the pair has found support in the last week at the 0.8550 level and is awaiting a catalyst. German Chancellor Angela Merkel has proposed keeping Germany in lockdown for another four weeks after virus cases rose again. The move would be yet another setback for the euro after France joined Italy with further restrictions.

EURGBP trades at 0.8575 with UK employment and inflation data coming over the next two days.

Europe Lockdown Grinds on as Vaccine Stall, UK Could See Drama

Germany’s plan to extend lockdown would tighten restrictions into April 18, according to a draft seen by Bloomberg. Merkel and regional government leaders will discuss the measures on Monday, but the latest moves come as tensions start to grow around the world. Freedom marches were seen in London and Germany, but also in the likes of Japan and Melbourne as citizens get tired of the continual meddling by governments as vaccinations start to roll out.

The UK government is also stoking tensions over its plans to extend its emergency virus powers into October. MPs will have a vote on Thursday, which includes powers to ban protests and arrest citizens that are not following the rules.

Mark Harper, chairman of the Covid Recovery Group of Tory MPs, noted that Boris Johnson’s lockdown roadmap would “guide us cautiously but irreversibly towards reclaiming our freedoms” by 21 June.

“Retaining most temporary provisions of the Coronavirus Act until October is not consistent with this pledge and will raise concerns that curbs will be reintroduced in the autumn,” he added.

Markets Turn to Employment and Inflation

Tuesday will bring the release of the latest UK employment data, with inflation numbers following on Wednesday. The UK jobs picture has been dismal with the country losing -114k jobs in November, while the latest reading is expected to be worse, with a shedding of -170k jobs. The furlough was extended into September and this was expected to cap the unemployment rate.

The latest inflation numbers for February are expected to show a rise to 0.8% from 0.7% but markets will be cautious about a potential move higher. If prices are seen to be heating up ahead of the UK’s re-opening, then it will put pressure on the Bank of England to bring its rate hike projections forward. The BoE had been talking of negative rates only months ago and could now be on the back foot and having to consider tightening their loose monetary policy.

The EURGBP could look for a move higher towards the 0.8700 level if the UK data is a negative for the pound. The pair has stalled at the same price level as late-February and could see a pullback. Stay up to date with the latest market movements by using the form below to get in touch.

The post EURGBP Looks for Support Despite German Lockdown appeared first on Euro Rate Forecast.


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