EUR GBP Surges Despite Potential of Restrictions

The EUR GBP exchange rate was higher by 0.70% on Monday to buck a seven-day losing streak. Traders are punishing the pound sterling as the government moves towards new restrictions, despite the fact that European nations look set to follow. The German economy will see consumer confidence released today.

The EUR v GBP was trading at 0.8545 with resistance above at 0.8600.

Consumer confidence leads the EUR v GBP data but will lag

Today sees German consumer confidence for the German economy, with the UK figure released on Wednesday.

We will be moving back to old territory with the potential for worse readings, while traders will shrug off better numbers due to future restrictions.

Weekend shoppers on Britain’s high streets fell by 2.6% this weekend as fears of the virus took hold. Shopper numbers plunged by 8.5% in London.

The outcome was better in market towns, shopping centres and retail parks, with footfall up 3.4%, 0.5% and 4.7% respectively.

Separate figures from the trade body UKHospitality showed a -40% fall in takings at the weekend with deep gloom about the prospects for New Year’s Eve.

Pantheon Macroeconomics estimated the economy could shrink by 1% between November and January.

That would grow to a 2% contraction if the government reverts to controls it introduced last spring, or a 6% slump with a full lockdown, Pantheon said.

“The growing nervousness of consumers meant that footfall increases dwindled with each day that passed,” said Springboard director Diane Wehrle. “This provided a forewarning for subdued performance of bricks and mortar stores and destinations over the weekend, which … is exactly what occurred.”

In Germany, IFO Economist Klaus Wohlrabe said that the “consumer-facing services like hospitality and tourism have seen falls in business. Retail is seeing the impact from coronavirus, there are fewer shoppers.”

Johnson reeling from David Frost exit

Another weight on the pound sterling has been the resignation of the UK’s Chief Brexit negotiator David Frost. Foreign Secretary Liz Truss has been given the task of negotiating the deal.

“You know my concerns about the current direction of travel,” Frost said in a letter released by Downing Street.

“I hope we will move as fast as possible to where we need to get to: a lightly regulated, low tax, entrepreneurial economy, at the cutting edge of modern science and economic change.”

He was also critical of the government’s covid response, saying:

“We also need to learn to live with Covid. I hope we can get back on track soon and not be tempted by the kind of coercive measures we have seen elsewhere.”

Unfortunately, it looks like coercive measures are coming across Europe with Boris Johnson calling a cabinet meeting and an expected 2-week lockdown after Christmas.

However, Europe is also facing fresh lockdowns after the Netherlands led the way with a full lockdown.

The departure of Frost leaves Boris Johnson more isolated and adds some uncertainty to the Brexit negotiations after the recent spats over fishing and the Northern Ireland protocol.

The post EUR GBP Surges Despite Potential of Restrictions appeared first on Euro Rate Forecast.

Source: https://www.eurorateforecast.com/2021/12/eur-gbp-surges-despite-potential-of-restrictions/