British Pound (GBP) Latest: EUR/GBP Decline Not Over Yet
GBP price, news and analysis:
- The sharp decline in EUR/GBP looks set to continue as the OECD forecasts a stronger economic recovery in the UK than in the EU.
- Meanwhile the UK and the EU are arguing over the export of coronavirus vaccines and German trade data suggest that UK-EU trade has fallen off a cliff post Brexit.
EUR/GBP slide to persist
The prolonged drop in EUR/GBP looks set to continue, even though a near-term correction is quite possible before the downward trend resumes. As the chart below shows, the pair has fallen from a peak of 0.9230 on December 11 last year to just 0.8560 at the time of writing – not helped by the latest economic forecasts from the Organization for Economic Co-operation and Development.
EUR/GBP Price Chart, Daily Timeframe (October 21, 2020 – March 10, 2021)
Source: IG (You can click on it for a larger image)
The OECD forecast Tuesday that the UK economy will grow by 5.1% this year and by 4.7% in 2022.At its last update in December, the OECD had forecast UK GDP growth of 4.2% in 2021 and 4.1% in 2022. By contrast, Eurozone growth was predicted to be just 3.9% this year and 3.8% next year, with the UK’s outperformance attributed to a more rapid rollout of COVID-19 vaccines that will allow the UK to unlock its economy and start to bounce back.
Meanwhile, the UK and the EU have become embroiled in a new vaccine row after European Council President Charles Michel claimed the UK has imposed an export ban on coronavirus vaccines – an allegation denied strongly by UK Foreign Secretary Dominic Raab.
The post-Brexit split between the UK and the EU was also emphasized Tuesday by German trade data that showed trade between the UK and Germany collapsed in January amid the economic fallout from Brexit and the Covid-19 pandemic in the first month after leaving the EU. Data showed imports from the UK fell by more than 56% to €1.6billion in January from the same month a year ago, after the end of the Brexit transition period.
While none of this will affect EUR/GBP directly, it adds to the evidence that the UK economy will perform relatively well despite Brexit and that the slump in the pair could yet continue. Moreover, Thursday’s meeting of the European Central Bank’s Governing Council could end with a decision to increase bond buying that would likely weaken the Euro all round.
--- Written by Martin Essex, Analyst
Feel free to contact me on Twitter @MartinSEssex
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