EURGBP Fails to Hold the 0.8700 Level Ahead of Data

The EURGBP exchange rate is flat on Tuesday morning, but the pair has struggled to see gains above the 0.8700 level. That is understandable as the European countries will see big data releases this week with GDP for Q1 being the most important on Friday. A boost in the EU vaccination program, alongside weakness in the British pound over the cautious reopening has led to the euro versus the pound rate selling off.

The EUR to GBP trades at 0.8690 in early trading with German consumer confidence ahead tomorrow.

Inflation could shift central bank policy

Inflation is slowly becoming a talking point once again as the major economies reopen. The week ahead will see the latest German and Eurozone inflation releases and this will come after the US saw inflation rising as it reopens further. Canada has also moved to taper its bond purchases as demand for raw materials lifted the economy. The worry for markets should be that the pricing is moving higher with so many countries still in lockdown. Central banks say the pricing pressures are “transitory,” but it is likely a short-term fix to keep the debate at bay.

Tomorrow will see consumer confidence for the German economy, but these sentiment readings are being dragged down by the lockdowns. Inflation and employment figures on Thursday could highlight the pricing situation, with the possibility of sluggish employment and higher prices.

Friday will be the key day with German, Italian and European GDP figures for the first quarter being released. This will let traders see if the EU is able to match the growth estimates set in recent weeks by the likes of the IMF.

Europe moves towards return of some tourism

The European Union has said this week that vaccinated adults in the US can fly to the continent in the summer. It comes as Malta reopens non-essential businesses and Portugal reported zero virus deaths for the first time since August.

The UK Prime Minister was quick to pour cold water on the recent reopening optimism by warning about complacency over a third wave. Johnson said:

“I think the important thing I think people want us to get on and do as a government is to make sure that the lockdowns work. They have, and I really pay tribute to the people of this country, this whole country of ours, that have really pulled together and, working with the vaccination programme, we have got the disease under control”.

He added that it “doesn’t mean that we have got it totally licked” and warned of a third wave after the summer. Despite the negativity he did cite the lastest figures which showed over half of the country’s population had been vaccinated.

The German employment and inflation this week, alongside the GDP, should be a good indicator of where the EUR v GBP trends in the coming weeks. If traders think the EU won’t meet its growth targets, then the single currency could sell-off again. The opposite could be the case if they outperform, however, eyes will also be on the latest inflation pressures.

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