GBPEUR Gives up Ground Despite Weaker Euro Data

The GBPEUR is 0.22% lower on Friday after giving its position at the 1.16 level. The pair has sold off in the last few hours of trading despite some medium level European data showing mixed results.

The market is likely seeing profit-taking after the Budget, while next week sees an ECB interest rate meeting.

GBPEUR is trading 1.1575 after finding buyers at 1.1560, while the markets await US jobs numbers.

Ireland Grows, France Sees Trade Struggles

Irish GDP figures showed a 3.4% growth rate for 2020, according to preliminary data Central Statistics Office today. The figures show strength in Ireland’s economy despite the ongoing pandemic, but the quarterly figure was lower. The economy fell -5.1% for the fourth quarter despite expectations for a gain of 11.1%.

Ireland was obviously boosted by its tech sector as transport, hotels & restaurants dropped by 16.7%, while construction sank 12.7% and the arts & entertainment was a full 54% lower. Industry increased by 15.2% while the information & communication sector added 14.3% on the year to bail out the domestic economy. Fitch Ratings services re-affirmed Ireland’s long-term credit rating last week with an A+ and a stable outlook.

France’s trade balance also widened in the January period with a print of -3.95bn euro compared to the expected -3.57bn. Traders will be ignoring this due to Brexit’s new rules and the lockdowns.

What Next for Lagarde and the ECB?

Next week will see the latest European Central Bank meeting and analysts are now expecting some action on the recent yields rise in bond markets.

The ECB hinted in the past that they had “kept some powder dry” and, although this is not an emergency, it will allow the bank to send a message to the markets. The higher inflation at the root of the bond yield moves were actually a boost for the ECB as they were concerned throughout 2020 that deflation may force them to intervene in the currency market to cool the euro’s rise. That risk has receded and the funds can be used for their favourite pastime of government bond purchases.

Bloomberg has highlighted that the ECB has been buying an average of 15bn euro in bonds every month since July 2020 when the height of the panic calmed down. Ms Lagarde and her colleagues may seek to increase this in the weeks ahead to 20bn euro per month or so. The move would aim to cap any drift higher in yields and it would leave room for additional purchases if conditions changed.

The GBPEUR may trade in the current range of 1.15-1.1700 until the ECB have clarified their position further on Thursday. Get in touch ahead of the next meeting to discuss your upcoming currency exchange and how it might be impacted.

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