EUR/GBP WEAKNESS SET TO CONTINUE

EUR/GBP will likely continue to slide as an easing of coronavirus lockdown rules in the UK contrasts with tighter restrictions expected in Germany and France, the Eurozone’s two largest economies.

In Germany, Covid-19 cases are continuing to rise and calls are growing for tougher action, although a row is ongoing between the German government and the country’s states over whether more measures are needed. In France, President Emmanuel Macron has said more Covid-19 restrictions could be imposed in the days ahead, but that “nothing is decided yet”, even as medical experts say new measures are needed urgently.

By contrast, in the UK some of the rules were eased Monday and further measures are expected to be lifted on April 12, and while some of this is already priced in to the EUR/GBP exchange rate further weakness in the pair would be no surprise.

EUR/GBP PRICE CHART, DAILY TIMEFRAME (NOVEMBER 9, 2020 – MARCH 30, 2021)

Source: IG (You can click on it for a larger image)

In addition, the yield spread between the 10-year UK Government bond (Gilt) and the 10-year German Bund is still rising, increasing the attraction of investing in Sterling rather than in the Euro.

Source: Refinitiv