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Pound Euro (GBP/EUR) Exchange Rate Dips as UK is Expected to Delay Easing of Lockdown Measures

June 14, 2021 - Written by John Cameron

GBP/EUR Exchange Rate Falls, Could Boris Johnson Delay Easing of Lockdown Restrictions This Month?

The Pound Euro exchange rate dipped by -0.2% this morning as Prime Minister Boris Johnson is now expected to delay the end of lockdown restrictions on 21 June, with a view to pushing it back by up to four weeks. The pairing is currently trading around €1.16.

Sterling struggled today as UK markets expect Boris Johnson to announce a delay to the easing of lockdown measures. These were due to go ahead later this month.

But GBP investors have become more pessimistic about the outlook for the UK economy.

The nation’s economic growth will suffer because of a delay to the final easing of lockdown restrictions.

UK Health Minister Edward Argar supported the delay, however, saying:

‘Now, were the prime minister to to delay things, those four weeks or say that we’re talking about, at a run rate which we’ve got at the moment of about, at the weekend it was about 275,000 second doses a day - that increases during the week - that would mean you would close that gap in that time between the [41m people who have have had a first dose and 29m who have had a second]. You’d get that extra 10m done, therefore [getting them up to the 81% protection].’

Pound investors will be awaiting today’s speech from the Bank of England’s (BoE) Governor Andrew Bailey.

Any dovish comments about the outlook for the UK economy – now that lockdown is likely to be extended across England – would be GBP-negative.

Euro (EUR) Edges Higher as Eurozone Economic Outlook Improves

The Euro (EUR) rose today following the publication of the latest Eurozone industrial production figure for April, which beat forecasts and rose by 0.8%.

Growing confidence in the Eurozone economy has contributed to the single currency’s strength today.

Peter Vanden Houte and Carsten Brzeski, analyst at ING, explain:

‘With the accelerated reopening of the economy, the eurozone is heading for a strong upturn. While price increases are grabbing headlines, core inflation remains subdued. Although the European Central Bank is in wait-and-see mode, we think the PEPP is unlikely to be lengthened beyond March 2022, but too strong a drop in bond purchases will be avoided.’

EUR traders will be looking ahead to this afternoon’s speech from the European Central Bank’s (ECB) Isabel Schnabel.

Any confirmations that the outlook for the Eurozone economy improving would further buoy the EUR/GBP exchange rate.

GBP/EUR Exchange Rate Forecast: UK Unemployment Data in Focus

Pound (GBP) investors will be looking ahead to tomorrow’s release of April’s UK ILO Unemployment Rate gauge.

Any indications that joblessness is falling throughout the UK would be GBP-positive.

However, the GBP/EUR exchange rate will suffer if Boris Johnson confirms expectations and delays the easing of lockdown restrictions this month.

Euro (EUR) traders will be eyeing the latest German inflation gauge for May. If this points to an improvement in the outlook for the Eurozone’s largest economy, then the single currency would head higher.

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