EURGBP Still in Recent Trading Range After Budget

The EURGBP exchange rate is flat on Thursday after a muted response to the latest Budget from Rishi Sunak. The pair closed lower after the Budget in what was a sign of support for the measures, but traders are not getting carried away with the size of the task ahead for the country.

The EURGBP trades at saw a low of 0.8640 after a low of 0.8540 last week. The pace of reopening will likely drive the pair going forward, but Germany is also set to relax lockdown measures despite having a slower vaccine rollout.

Chancellor Announces ‘Incredibly Exciting’ Freeports

Rishi Sunak has announced the creation of eight Freeports across the country and called it an “incredibly exciting” opportunity to fire up the economy after Brexit.

The new business hubs up and down England will aim to attract jobs and investments and help the country to recover from the pandemic. The Treasury has said the new ports will be “on a scale we’ve never done before”.

The location of the new facilities are also in traditional Labour heartlands, such as Humber and Teeside in what is also likely an attempt to sway voters in those regions.

The Chancellor’s Budget has set out a plan to raise corporate tax rates by 19% to 25% in 2023 and also to freeze allowances on income tax to 2026. This removed the near-term risk to the pound as many warned it may choke off the economy’s growth if it happened too quickly.

The furlough scheme is also being extended into October with 600k self-employed workers added, alongside moves to boost youth employment with trainee programs and apprenticeships.

German Economy to Loosen Restrictions

German Chancellor Angela Merkel has buckled under political and public pressure to loosen the country’s restrictions in the coming weeks. The country has seen a slow rollout of vaccines compared to the UK but it is still set to open nonetheless. An increase in vaccinations and rapid testing is being used as a survey shows only 35% of Germans support the lockdowns, which is down from 75% in March 2020.

Europe’s largest economy has seen employment and manufacturing figures stable and could support the EUR to GBP outlook if it does reopen in alignment with the UK. Britain’s fast rollout of vaccines saw big gains for the pound but the Prime Minister has mapped a cautious reopening, while Rishi Sunak has given a sobering reminder of the state of the country’s finances.

The UK did see positive news with a double-digit gain in retail store footfall in February, so the sector will be keen to reopen and the country should get a boost in the coming months.

The EURGBP is trading in the same range as last week with no economic data ahead into the weekend. The initial target for sterling would be a move to test the 0.8600 level. If you have an upcoming currency exchange involving EURGBP you can get in touch using the form below to ask a question or discuss the above factors in further detail.

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