Pound and Euro Exchange Rate Climb as UK Economy Soars » Future Currency Forecasts

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Euro (GBP/EUR) exchange rate boosted by upbeat UK growth data

The exchange rate between the pound and the euro (GBP/EUR) slowly rose today as GDP figures showed the UK economy returning to pre-pandemic levels. A continued rise in Covid-19 cases across Europe continued to put pressure on the euro as well as slowing growth in the German economy.

British Pound (GBP) Boosted by Positive Growth Numbers Despite New Party Reports

The British pound (GBP) hit its highest levels since the days following the Brexit vote as positive growth figures and optimism surrounding the currency’s long-term recovery helped boost the pound. .

GDP figures released on Friday indicated the UK economy grew at a rate of 0.9%, above pre-pandemic levels of 0.7% from February 2020. The positive growth was largely driven by an increase in early purchases before Christmas and an increase in restaurant reservations. Analysts, however, expect a drop in December and January due to the impact of the Omicron variant, and this expected drop may limit the upward movement of the pound.

Sterling’s gains could be capped by domestic headwinds today following fresh reports of illegal gatherings at 10 Downing Street. Prime Minister Boris Johnson has faced continued calls for his resignation amid reports on Thursday of two departures the day before Prince Philip’s funeral.

Euro (EUR) muted as German growth disappoints

The Euro (EUR) rose against its riskier counterparts but remained subdued against safer currencies today. It comes amid the Covid-19 surge and disappointing German growth figures.

The German economy grew 2.7% in 2021 after falling 4.6% in 2020, and remains well below pre-pandemic levels. Although the largest economy in the trading bloc grew in the second and third quarters, the German economy contracted in the last quarter of 20201 due to soaring Covid-19 infections. Disruptions in the global supply chain are also believed to have hurt the recovery of the German economy as microchips are lacking in hot car production.

The continued rise in Covid-19 cases across the continent may also have dragged the euro lower, as cases in Germany hit a new daily high of 92,223.

Bets on a possible early interest rate hike by the European Central Bank (ECB), however, could help support the currency. ECB Vice President Luis de Guindos told attendees at a UBS event that the euro zone’s inflation spike may not have been as “transient” as initially thought, energy costs and supply bottlenecks likely continuing to drive the rate up.

Boris Johnson Covid-19 EUR Euro exchange rate GBP GBP EUR GDP Germany Omicron Pound sterling United Kingdom

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