The GBPEUR exchange rate erased early week losses with a strong move higher into Friday. German politicians were calling for a vote of no confidence after Chancellor Merkel was forced to apologize for here “mistake” after a u-turn on Easter lockdowns. The week also saw drama in the Suez Canal as a stricken cargo ship got stuck in the waterway, one of the busiest trade routes in the world.
Two hundred ships have been delayed or re-routed from the canal and LNG shipments to Europe were said to be seeing potential delays.
UK Employment and PMIs Help the Pound
The pound was supported this week by a jobs number that saw the unemployment rate dipping to 5%, while PMI data showed strong displays from the manufacturing and services sector in the country. Businesses are getting more confident and ramping up activity as they await a further reopening of the economy.
Other data this week saw inflation in Britain coming in much less than expected at 0.4% after analysts had expected to see a 0.9% gain. The drop was blamed on retailers slashing the price of clothing lines and footwear, which doesn’t usually follow the January sales period. John Lewis announced the closure of five of its retail stores and this will be adding to the discounting as stores wind down their surplus stock.
The inflation miss will remove pressure on the Bank of England to update markets on rate rises. Bond yields in the US had pulled government borrowing rates higher and markets were on alert for any heating up in prices. The situation in the Suez Canal is something that could also filter through into prices as delays and shortages could be a risk.
Merkel no Confidence Vote Rocks Europe
Members of Germany’s Bundestag could soon be called to vote on whether Angela Merkel has lost their support after a number of lawmakers pounced on a rare error to ask for a no confidence vote.
Free Democratic Party (FDP) leader, Christian Lindner, said that Ms Merkel, “can no longer be sure of the unanimous support of her coalition.”
His comments came after her plan to enforce a strict Easter lockdown backfired leading to her admitting that the move was a mistake.
It was another week of wrangling over vaccines after the EU also looked to block exports to UK if they don’t receive their quotas. The move was the latest in a souring of the relationship between the UK and EU post-Brexit and the blocks could see the UK’s vaccine rollout program affect, although the country has said that it has administered shots to over 50% of the country and the reopening plan is still on track.
For the GBPEUR exchange rate, it was a rollercoaster week four days of losses in sterling were almost wiped out on Thursday afternoon with the current developments. The 1.1709 level was the recent high and this will be resistance for the pair.
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