EURGBP Higher After Monday Stumble

The EURGBP exchange rate was 0.19% higher on Tuesday after losing ground on Monday. The exchange rate looked to be heading higher on Friday’s price gains but slumped again on Monday to set up potential gains for the pound. Thursday will see the latest Bank of England interest rate decision.

The EUR to GBP rate will also see PMI data released on Wednesday for the UK, Europe, and German economies.

UK borrowing drops but still at 99% of GDP

The UK government registered borrowing at lower levels in May than was expected, and lower than May last year, but the figures still see borrowing at 99% of GDP.

According to the Office for National Statistics (ONS), borrowing was £24.3bn during May, £19.4bn lower than the same month in 2020.

The number is still the second highest since records began, as the government continued to pour fiscal support into the economic system. In the past year, government debt has risen to £2.2trn, or 99% of GDP, which is the highest rate since the 1960s.

The huge debt pile is another reason why investors fear inflation as higher bond yields would drive up government borrowing costs.

That pus the Bank of England in a tight spot for Thursday’s Monetary Policy Committee meeting as the bank seeks to explain their stimulus and low interest rate policy as inflation surged to 2.1% in the latest figures. Other central banks are hinting at a change in monetary policy and the BoE may have to do the same.

EU states also seeing virus cases rise

The pound had seen pressure from a rise in virus variant cases as the country logged 10,000 in a day for the first time since February, but that is now a trend spreading out to Europe.

In Ireland, virologist Dr Kim Roberts, of Trinity College Dublin said people should be prepared for a change to the proposed easing of restrictions due to the Indian variant.

Leo Varadkar also said: “It’s not beyond the realms of possibility that if Delta really takes off all over Europe and all around the world that we could see travel restrictions being re-imposed again,” highlighting Belgium. who have recently banned travellers from the UK.

The coronavirus variant that was growing in the UK has now become dominant in Portugal and also been seen in clusters across Germany, France and Spain, which is prompting European health officials to warn that further action is needed to slow the spread. The strain accounts for 96 per cent of infections in Portugal, more than 20 per cent in Italy and about 16 per cent in Belgium. That is allowing the pound sterling some breathing room after the UK numbers risked the pound’s strength.

The EURGBP exchange rate trades at 0.8567 but there is still a chance of further lows through the 0.8540 support level.

The post EURGBP Higher After Monday Stumble appeared first on Euro Rate Forecast.