GBPEUR Exchange Rate: Week in Review April 24th

The GBP to EUR exchange rate was lower again this week after a rally earlier in the week failed. This was somewhat surprising as the UK economy has sprinted out of the blocks with its recovery from lockdowns. It’s likely that the price action follows the old investment adage of “buy the rumour, sell the fact”. Traders were happy to price in the faster pace of the economic bounce but are less impressed once it arrives. Hopes for an EU catch up on vaccines has still played into the pair but even that is coming a bit late to catch the pound’s growth.

The GBP to EUR closed the week around the 1.1510 level and could be in line for further losses after weak buying activity.

Employment and inflation failed to spark sterling

The week started with employment figures and inflation from the British economy, but these failed to spark the currency. The country saw job losses that were half what analysts had expected and the unemployment rate dropped to 4.9%. Traders were aware of the ongoing furlough scheme and some analysts fear that unemployment would be double the current number without furlough. The UK may see companies continue to tap furlough until its end and then close their respective businesses. Payrolls numbers were also sharply lower in March and this is weighing on the currency.

Inflation followed a day later, and the UK followed other locked-down nations with cooler activity in prices. The US has been the only country with prices heating up and it will be interesting to see what the Bank of England has to deal with in the next two months as the recovery picks up speed. UK headline inflation came in at 0.7%, which was 0.3% higher than last month, but still lower than forecasts.

A trading update from retail chain Primark said that many of its stores had smashed their daily sales records with many working increased hours to deal with demand. The company also held onto to every one of its staff due to furlough and should see a healthy recovery.

ECB and PMIs close out the week

The ECB kept its key interest rate on hold on Thursday and committed to the current bond buying program “at a significantly higher pace”.

ECB President Christine Lagarde stressed that there was a long way to go, while adding that any talk of winding down asset purchases at this stage was “premature”. The bank’s current bond buying levels of 28bn euro per month are at the same level as the height of the crisis.

The week finished with PMI numbers and Germany saw strong figures in its key manufacturing sector, while the UK did well in the services sector that dominates the economy. HIS Markit called the figures the fastest spell of growth since 2013.

The GBPEUR will look to test the lows of last week near 1.1470 and that level will determine whether traders are still bailing out on the pound.

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