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GBP/EUR Exchange Rate Sinks as UK PM Warns of ‘Extra Precautions’ After July’s Lifting of Lockdown Measures

Published: 1 Jul at 4 PM Tags: Pound Sterling, Euro Exchange Rate, Currency Exchange, Forex, Euro Crisis, UK, Exchange Rates, Economy, Pound Euro Exchaneg Rate,

The Pound Euro exchange rate fell by -0.3% today following news that the UK-EU financial services equivalence deal ‘has not happened’, according to UK Chancellor Rishi Sunak. This left the pairing trading around €1.16 at the time of writing.

Sterling has suffered from growing concerns over tensions between the UK and the EU, despite the Chancellor’s reassurances that Europe will remain a ‘close partner and ally’.

ITV business and economics editor Joel Hills commented:

‘Chancellor confirms that UK has given up trying to secure greater access to EU markets for financial services firms.

‘City of London has been largely cut off since Brexit completed at end of last year.’

Prime Minister Boris Johnson has also warned that ‘extra precautions’ may be needed following the easing of lockdown restrictions on 19 July.

As a result, GBP investors have become more cautious about the outlook for the UK’s economy.

Extra precautions could limit the economic recovery should they inhibit the normal functioning of British businesses.

Today also saw the release of the latest UK manufacturing PMI for June, which slowed to a worse-than-expected 63.9, down from May’s record high of 65.6.

Martin Beck, the senior economic advisor to the EY Item Club, commented on the statistic:

‘June’s survey also highlighted two interrelated issues which are likely to be key influences in the second half of this year – supply chain disruption and cost pressures.’

The Euro (EUR) rose today following the release of the latest German retail sales data for May. These rose from April’s -5.5% to 4.2%, restoring faith in the Eurozone’s largest economy.

The Eurozone’s latest unemployment rate for May, which fell from 8.1% to a better-than-expected 7.9%, has also restored confidence in the bloc’s employment situation.

As a result, the EUR/GBP exchange rate has risen on growing confidence in the outlook for the Eurozone’s economy in the months ahead.

Looking ahead to tomorrow, the European Central Bank’s President, Christine Lagarde, will deliver a key speech.

Any indications that there’s a positive year ahead for the Eurozone economy would further buoy the Euro Pound exchange rate.

However, if Downing Street continues to reiterate its confidence in lifting lockdown restrictions later this month, then we would see Sterling begin to claw back some of its losses against the single currency.
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