EURGBP Slightly Higher Ahead of German Data

The EURGBP exchange rate was 0.08% higher on Tuesday as traders returned from the bank holiday. Returning investors will weigh inflation data from Germany, which was at its highest level since 2018, while Germany also sees the release of the latest employment data.

The EUR to GBP rate is trading at 0.8600 after sterling found some support later last week.

German Employment Should Drive Price

German employment data is released on Tuesday and that could drive the price of the pound to euro for the rest of the day as markets return from thin bank holiday trading.

A loss of -9k is expected from Europe’s largest economy as Germany struggles with reopening and the unemployment rate is expected to stay stuck at 6%.

Data agency Destatis has said that there is no real recovery in the German labor market after a long phase of lockdowns. The lifting of the latest lockdown is helping to see confidence return to business owners, as seen in recent sentiment data, but it is not easy to repair some of the services sector damage.

Susan Michie, professor at UCL and a member of the Scientific Pandemic Insights Group, said: “We’re on a knife edge. We could go either way with this new variant.”

The comments coming from advisers do not tally with Boris Johnson’s claims that the vaccines help to defeat the variants. With the high level of vaccinations in the UK there should be no talk of third wave of infections.

Passengers now arriving from countries on the UK’s red list are being channelled via a dedicated terminal at Heathrow Airport. Red-list passengers had been waiting in the same arrivals hall as passengers from lower-risk countries, before moving to hotels for quarantine and maybe it is late in the day for the government to be making such changes to the travel policy.

German Inflation at Highest Level Since 2018

German inflation rose to 2.4% in May, which is the highest rate in over two years. The data is another example that the loose monetary policy in developed economies could see an overheating in prices.

The federal statistical agency said on Monday that consumer prices were at levels last seen in October 2018, due to a 10% year-on-year increase in energy prices.

Travel prices have also surged higher after lockdowns were lifted and package holiday prices rose by around 7%. Central banks want to claim that higher prices are transitory, but the developed economies have record levels of savings after the lockdowns and consumers could continue to unleash some of it into the economy.

The German data is similar to other nations such as the UK, US, and Canada who are seeing questions raised about the ultra-low interest rate policies planned for the next two years.

The EURGBP now has resistance at 0.8650 after last week’s drop and 0.8575 is support for the pair.

If you would like to learn more about the factors impacting GBP or EUR exchange rates for an upcoming currency transfer, please feel free to contact myself, Tom Holian, using the form below.

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