EURGBP Creeps Higher Ahead of the Queen and Employment

The EURGBP exchange rate was 0.10% higher on Monday as traders reacted to the latest reacted to the latest fears of further restrictions in the UK from the Indian virus variant.

The EUR to GBP rate is trying to recover some ground after the UK got a boost from the latest growth figures.

Queen’s speech and employment looms

A quiet trading session in Asia could also see a quiet day for Europe with financial markets waiting for the Queen’s Speech, which will set out the government agenda or the latest Parliament.

Markets are looking to see if lawmakers are given a free reign to expand fiscal measures. Further spending would aim to help drive the post-virus recovery and make good on Prime Minister Boris Johnson’s plans on “levelling up” the UK economy. The government has now secured an 80-seat majority, so it’s an agenda that will face very little scrutiny.

The UK sees employment data tomorrow and the market will look to see how the economy is faring with the lockdowns and furlough. The reopening in the UK will boos the employment situation, but the furlough is masking the true employment situation in the country. The extension to September will help, but the services sector will need to boost the economy in the latest reopening.

Europe is in a similar situation and the lag between reopening is keeping investment flows sturdy for the British pound in the second quarter. The GDP outlook is strong for the UK and this week will be a test for the euro with Q1 updates for the economy.

EU GDP could set the tone

The European economy sees GDP figures this week and the EU will be under pressure to bounce back from the lockdowns and try to catch up to fast UK growth.

The Bank of England upgraded growth figures for the UK to 7.2% and the Eurozone will struggle to match that with the ongoing lockdowns.

This week also sees inflation figures for the UK and Europe, so it could be a pivotal week with traders able to plan ahead for the next central bank actions. Inflation has picked up in the US and it could happen next in the UK as the economy reopens. Central banks have played down expectations for inflation but the price situation is rising due to shortages and not just the reopening of the economy.

The UK is reopening but is now seeing increased talk of restrictions due to the virus variant in India. The UK’s media never seem to question why the government allows travellers to flow in from the country as other nations, such as Australia are completely shut down.

The EURGBP was sharply rejected by the 0.8700 level and the British pound has regained control into the week ahead. The Euro is trying to bounce back and this week’s GDP will be the big figure.

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