GBP/EUR stumbles amid ongoing coronavirus concerns

Philip McHugh May 25th 2021 - 2 minute read

The pound found itself on the back foot on Monday, with persisting fears over UK coronavirus developments undermining the currency.
Sterling is faring better so far this morning, with GBP/EUR stable at €1.1582 and GBP/USD buoyed at $1.4193. GBP/CAD has firmed to C$1.7096, while GBP/AUD and GBP/NZD hold steady at AU$1.8272 and NZ$1.9638, respectively.
Looking ahead, will a larger-than-expected contraction of German first quarter GDP leave the euro on the defensive today?

What’s been happening?

The pound had a slow start this week, as ongoing concerns over the spread of the Indian variant of the coronavirus in the UK continued to weigh on the currency.
With the latest data showing that cases linked to the new strain continue to rise, GBP investors are growing increasingly wary that the government may need to revise its roadmap for opening up the final parts of the economy next month.
The US dollar also struggled on Monday, as demand for the safe-haven currency was dented by a risk-on mood and falling US Treasury yields.
The euro, meanwhile, was able to garner support amid an upbeat market mood and the prospect of a swift rebound in the Eurozone economy over the summer.
This optimism comes amid the EU’s continued acceleration of the vaccination programme and the hope that most countries within the Eurozone will be fully reopen in the next couple of months.

What’s coming up?

Kicking off today’s session were Germany’s latest GDP figures. The final reading for the first quarter came in slightly below initial estimates, putting some pressure on the euro in early trade.
Still to come this morning is the publication of this month’s IFO business climate index, which may offer support to EUR exchange rates if German business sentiment continued to improve in line with expectations.
For GBP investors, the focus this morning will be on the Confederation of British Industry’s (CBI) distributive trade index, with Sterling poised to rise if retail trade volumes in the UK continued to soar this month as more of the economy opened up.
Finally, in the absence of any US economic data of note, the US dollar could struggle to find any strong directional bias, particularly if market sentiment remains broadly upbeat.

Written by
Philip McHugh

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