Pound Euro Exchange Rate Falls, UK to Face ‘Summer of Chaos’ says Labour Leader

July 19, 2021 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate Falls, UK to Face ‘Summer of Chaos’ says Labour Leader

GBP/EUR Exchange Rate Sinks, England Lifts Lockdown Restrictions

The Pound Euro exchange rate fell by -0.3% today despite England lifting all Covid-19 restrictions on ‘freedom day’. Labour leader Keir Starmer described the decision as being ‘reckless’ setting up the UK for a ‘summer of chaos’. The pairing is trading around €1.16 at the time of writing.

Starmer said:

‘Labour does not support the government’s plan. Lifting all restrictions at once is reckless – and doing so when the Johnson variant is already out of control risks a summer of chaos.’

With Covid-19 infections soaring across the UK, Pound investors have become more concerned about the nation being plunged back into lockdown in the coming months.

Jim Reid, an analyst at Deutsche Bank, commented on the situation:

‘[T]he world will be watching the U.K. experiment with huge interest. It could show a pathway back towards normality or it could be a warning to even heavily vaccinated countries that Covid will be a problem for a decent length of time still.’

In absence of any influential UK economic data today, GBP investors have instead monitored the response to Downing Street’s lifting of lockdown measures.

However, due to the high levels of uncertainty, investors have remained relatively wary of Sterling as the outlook for the UK economy rests upon the success of the vaccination efforts.

Euro (EUR) Exchange Rate Edges Higher Despite Weak Eurozone Data

The Euro (EUR) rose against the weaker Pound today despite weak Eurozone economic data dampening confidence in the bloc’s economic recovery.

Last week saw the Eurozone’s trade surplus fall below forecasts of €5.5 billion to €3.4 billion, while the bloc’s inflation rate dropped from 2% to 1.9%, supporting the European Central Bank’s (ECB) dovish forecasts for inflation pressure.

Analysts at Reuters said:

‘The European Central Bank expects inflation to rise later in the year, but it has made it clear that the acceleration is mainly due to one-off factors as the global economy recovers from the worst phase of the coronavirus pandemic. Therefore, no tightening is on the cards and borrowing costs are set to stay ultra-low for years to come.’

With no influential or market-moving Eurozone economic data due for release today, we could see the EUR/GBP exchange rate shed some of its gains before the session is over.

GBP/EUR Exchange Rate Outlook: Could Lockdown Fears Haunt the Pound?

Euro (EUR) investors will be looking ahead to Thursday’s ECB interest rate decision. Although the bank is expected to hold its interest rate at 0% could dovish policy weigh on the single currency?

Thursday will also see the release of the Eurozone’s latest consumer confidence gauge for July. Any signs of improvement could drive-up the EUR/GBP exchange rate.

The GBP/EUR exchange rate could continue to fall this week, however, if rising daily cases of Covid in England spark concerns of another lockdown in the next few months.

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TAGS: Euro Forecasts Pound Euro Forecasts