GBP/EUR Forecast: Pound to Euro Exchange Rate Firms as German GDP Impresses

February 24, 2021 – Written by John Cameron

The Pound to Euro exchange rate firmed this morning as positive GDP data from Germany helped to bolster EUR.

At the time of writing the pair are currently trading at around 1.1651.

Pound (GBP) Finding Continued Support from UK Lockdown Easing
The Pound was supported this morning as more details emerge from the UK Government’s proposed roadmap out of lockdown.

With schools set to reopen on the 8th of March, Professor Van Tam spoke to UK television this morning about the first stage of the roadmap, saying:

‘I say we’ve absolutely got to [reopen schools], because of the welfare of children – mental, educational, physical, the whole spread of child welfare – depends upon them going back to school.’

‘And I think we are in a much more optimistic place now because of the quite stunning effects, so far, of the vaccine programme.’

Furthermore, Prime Minister Boris Johnson has announced an extra £700 million for tutoring schemes and summer schools to help children catch-up from the time spent at home during the course of the coronavirus pandemic.

Speaking on the announcement he said:

‘No child is left behind as a result of the learning they have lost over the past year.’

German GDP Growth Gives Euro (EUR) Much Needed Support
The Euro found itself supported this morning as positive GDP Growth data from the largest economy in the Eurozone, Germany, beat forecasts.

The German economy expanded 0.3 percent on quarter in the last three months of 2020, much better than initial estimates of a 0.1 percent growth, allowing the country to avoid a double-dip recession.
Carsten Brzeski of ING explains:

‘In sum, the construction sector, industrial activity and foreign demand helped to stop the German economy from falling into contraction during the second lockdown.’

Brzeski warned, however, that this growth in the fourth quarter could push back growth in the first quarter of 2021:

‘The stricter lockdown measures since mid-December, the harsh winter weather in February, a reversal of any pre-Brexit hoarding in the UK and weaker foreign demand at least from other Eurozone countries have increased the risk of an unwelcome rotation. The growth drivers of the fourth quarter could easily become drags in the first.’

GBP/EUR Exchange Rate Forecast: Eurozone Consumer Confidence in Focus
Euro traders will be looking towards tomorrow’s final Eurozone consumer confidence for February which is forecast to remain in contraction due to ongoing coronavirus restrictions, the figure of -14.8 could drag down EUR sentiment.

The Eurozone continues to struggle against the coronavirus, and with AstraZeneca expected to miss its vaccine supply target to the EU, the Euro could see major losses against the Pound.

Euro investors will also look at Germany’s GfK Consumer Confidence for March tomorrow, forecast at -12, investors will be hoping Germany can beat forecasts and provide relief for the single currency.

Pound investors will be looking towards Friday’s Bank of England (BoE) Haldane speech, with any hawkish commentary surrounding the inflation outlook of the UK and economic recovery driving up Sterling higher.

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