Euro pound exchange rate (GBP / EUR) rises as UK government announces support package
The euro pound (GBP / EUR) exchange rate edged up on Tuesday as the UK government suspended the introduction of stricter Covid measures and the Treasury announced £ 1billion support for businesses hospitality and leisure.
After falling on Monday amid Omicron fears and the threat of tighter UK restrictions, the euro pound exchange rate gained around 0.3% on Tuesday to trade at € 1.1750 in the time of writing.
British Pound (GBP) Strengthens Despite Covid-19 Threat
The British pound (GBP) has stabilized and recovered some of the losses on Monday today after the UK government decided not to increase restrictions on coronaviruses despite the spike in Covid-19 cases in the UK United.
Following an emergency cabinet meeting, Prime Minister Boris Johnson did not announce any new measures but said the UK government “reserves the right” to tighten restrictions.
Sterling also received backing after British Chancellor Rishi Sunak announced a £ 1bn financial support package for companies hit by declining consumer confidence amid fears of the Omicron variant and the outbreak of coronavirus infections.
“The spread of the Omicron variant means that companies in the hospitality and leisure industries face enormous uncertainty at a crucial time.”
However, as UK Covid-19 infections continue to remain near record daily highs and the threat of tighter restrictions persists, the euro pound exchange rate could come under pressure again.
Meanwhile, signs of optimism in trade talks between the UK and the EU after Brexit over the Northern Ireland Protocol could provide some support for the pound.
Following the resignation of British chief negotiator Lord Frost last week, his replacement Liz Truss will meet his European counterpart Maroš Šefčovič on Tuesday to continue negotiations.
Some analysts consider Truss more likely to take a softer stance in the talks than his predecessor, which could lead to progress in the negotiations.
The Irish Taoiseach’s comments seemed to fuel the optimism of progress, saying:
“We were on the right track – the European Union and the UK. I think we still are. I think Liz Truss understands what is required.
Euro (EUR) hit by drop in consumer confidence
The euro (EUR) weakened during Tuesday’s session, with data showing lower consumer confidence in the eurozone and in Germany.
Eurozone consumer confidence fell more than expected to an eight-month low in December as cases of Covid-19 and much stricter Covid-19 rules took effect, with more threat in many country.
The Netherlands announced a strict lockdown over the weekend, with more to follow in an attempt to slow the spread of the Omicron coronavirus variant.
Meanwhile, the January GfK consumer sentiment indicator for Germany fell far more than expected to indicate its lowest level since June, as the fourth wave of coronavirus in the country put pressure on consumer confidence. .
Going forward, the spread of the Omicron variant and the risk posed to economic activity by tighter restrictions in the bloc could further erode euro sentiment.