EUR GBP Moves Higher Ahead of UK GDP Update

The EUR GBP exchange rate was higher by 0.80% as the euro made a strong move above support levels. The pound is being punished for Boris Johnson’s move to new restrictions under the so-called Plan B.

The EUR v GBP trades at 0.8570 with an update on UK growth released on Friday.

Johnson government moves to restrictions amid criticism

The Prime Minister announced plan B restrictions for the UK, but critics are saying it is a distraction from the Christmas party allegations.

Boris Johnson has said that the restrictions are being put in place because of the Omnicron variant, but scientists have said that it is a mild variant with no cause for alarm.

“I understand and share the anger up and down the country at seeing No 10 staff seeming to make light of lockdown measures,” Mr Johnson said. For the EUR v GBP this is a blip as confidence is being lost in governments globally and with protests over the virus measures, civil unrest could unseat governments in the year ahead.

Netcare was the latest medical authority in South Africa to suggest that Omicron infections are ‘a lot more mild’ than anything that has come before.

New restrictions to cost £4 billion per month

The new Covid restrictions could cost the UK economy £4 billion a month, with taxpayers footing the bill for more emergency support, a think tank has warned.

The Institute of Economic Affairs said Plan B measures from the UKM Government could “easily knock” 2% off the country’s GDP. It also warned that the Chancellor may need to launch more support schemes to help struggling sectors and firms, adding further to the UK debt pile.

The IEA called for “much stronger evidence” that the new variant sweeping across the UK is more deadly and not just more infectious before the government puts further measures in place.

Julian Jessop, economics fellow at the IEA, said: “Even without a full national lockdown, the additional Covid restrictions apparently being considered in Whitehall could easily knock 2% off GDP – costing the UK economy £4 billion a month – and force the taxpayer to stump up billions more to prevent a new wave of bankruptcies and job losses.”

Friday will see the release of 3-month growth figures into October for the UK economy. A stronger number could lift the pound sterling, but the latest restrictions mean that the Bank of England is unlikely to raise interest rates in December.

“This is on top of all the social costs and harms to people’s wellbeing and liberties, as well as the risk of further disruption to children’s education.”

Under the Government’s Plan B, people are being told to work from home to limit the spread of the mild variant. Vaccine passports are also said to be implemented for larger crowds.

Germany saw a change in its leadership for the first time in 16 years as Angela Merkel handed power to Olaf Scholz and the three-party coalition.

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