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Pound Euro Exchange Rate Sinks as Indian Variant Fears Dampen Confidence in UK Economy

Published: 20 May at 2 PM Tags: Pound Sterling, Euro Exchange Rate, Currency Exchange, Rupee Exchange Rate, Euro Crisis, UK, Exchange Rates, Economy, Inflation, Pound Euro Exchaneg Rate,

The Pound Euro exchange rate fell by -0.2% today as the Indian variant of Covid-19 has weakened confidence in the UK’s ability to recover its economy in the months ahead. The pairing is currently fluctuating around €1.15.

Sterling traders have become increasingly jittery over the prospect of a delay in the Government’s efforts to ease lockdown restrictions. The new strain of Covid-19 – the Indian variant – has raised concerns over increased levels of transmissibility of the virus.

As a result, UK markets are becoming more cautious as the Indian variant could delay the further easing of lockdown restrictions next month.

In UK economic data, today saw the release of the latest factory orders, which reported an improvement in both orders and output this month.

Tom Crotty, Group Director at chemicals firm INEOS, commented on the data:

‘These latest figures are very positive, and it is great to see the sector bounce back from the bleak situation we saw last year. While this progress is welcome, firms continue to face several supply challenges and cost pressures as the UK moves along the roadmap.’

Meanwhile, the Euro (EUR) rose against the Pound following the publication of the latest Eurozone construction output figure for March.

The data revealed that the Eurozone’s construction output had beaten forecasts, rising from -2% to 2.7%, adding to the growing confidence in the bloc’s economy.

However, yesterday saw the latest core Eurozone inflation data miss projections, leaving some investors concerned about the outlook for the economy.

Looking ahead, Pound (GBP) traders will eye Friday’s release of the latest consumer confidence report for May.

Any improvement would drive-up the Pound Euro exchange rate as confidence grows in the UK economy.

Euro (EUR) traders will await tomorrow’s release of the Eurozone’s PMI composite report for May. If this shows a marked improvement in the Eurozone’s economy, then the single currency would head higher.

Tomorrow will also see the release of the latest flash UK PMI figures for both manufacturing and services for May.

The Pound Euro exchange rate could benefited from improving PM data. But could concerns over the Indian variant drag down Sterling?