EUR GBP Looks to Escape Recent Trading Range

The EURGBP exchange rate is still caught in a range between 0.8500 to 0.8700. The week ahead will bring employment data for the pound, alongside inflation. The eurozone will also have core inflation and rate hike expectations could see the euro seek to move higher but coronavirus cases are a headwind for the euro.

The EUR to GBP rate trades at the 0.8530 level and also has the Article 16 issue looming.

UK data will dominate but needs to shrug off Brexit

The UK economy will have data early in the week with employment and inflation, but first needs to shrug off the Article 16 issue.

Previous comments from sources close to the government said that the triggering of the Norther Irish border clause could happen after COP26. The Irish Minister for Foreign Affairs, Simon Coveney has warned again of a ‘very robust’ response from the EU in that event.

Contingency planning is under way in Brussels and Dublin over fears that the British government triggers Article 16 this week to suspend parts of the Northern Ireland protocol.

He said that the British government would be “disingenuous” to pretend like there would be any other response.

The European Union’s response would likely go as far as suggesting the Brexit deal is null and void and that will reignite in/out calls for the UK. Some news outlets in the UK are already running polls for re-joining the EU so that is maybe the long game with the recent spats.

The UK has employment figures on Tuesday with hopes for a dip in the unemployment rate to 4.4%. The inflation rate could be the important data on Wednesday with a leap to 3.9% inflation expected from the recent energy problems.

European union has surging coronavirus cases as a headwind

The European Union is seeing coronavirus cases surging in another headwind to growth. A partial lockdown in The Netherlands is coming with a full lockdown for the unvaccinated in Austria.

Belgium and Denmark have also reintroduced restrictions and record cases in Germany could see the country also adding further rules.

The latest figures are a worry with winter only beginning and if we see a cold winter snap then there have been warnings of dwindling gas supplies, so we are really looking at a potentially tough winter for the European nations.

The European Commission only released its “Autumn 2021 Economic Forecast” last week with the group saying that the economy is rebounding from the recession faster than expected.

Despite some headwinds, the EU economy is projected to keep expanding over the forecast period, with a growth rate of 5%, 4.3% and 2.5% in 2021, 2022 and 2023 respectively. Growth rates for the euro area are projected to be identical to those for the EU in 2021 and 2022, and 2.4% in 2023. But the outlook was said to depend on two factors: the evolution of the coronavirus and the pace at which supply adjusts to the rapid turnaround in demand.

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