The Pound to Euro (GBP/EUR) exchange rate briefly touched a five-month high last week after market sentiment was bolstered by news of a possible coronavirus vaccine.
What’s Been Happening: Pound Surges on Vaccine News
The Pound roared higher against the Euro through the first half of last week, following the news that US pharmaceutical giant, Pfizer’s experimental coronavirus vaccine has shown 90% effectiveness.
News of a potential vaccine appeared to particularly benefit Sterling, likely on the expectation that as the hardest hit by the coronavirus pandemic, the UK economy potentially stands to gain the most from a vaccine.
After striking a five-month high, the Pound started to give ground in mid-week trade amidst renewed Brexit uncertainty, with these losses then accelerating on Thursday with the publication of a weaker-than-expected GDP estimate.
Sterling was able to claw back some of these losses at the end of the week however, as the departure of Stauch Brexiteer and Johnson adviser, Dominic Cummings was seen as bolstering the chances of a Brexit deal.
The Euro, meanwhile, stumbled out of the gates last week, with soaring coronavirus cases across Europe as well a slump in Germany economic sentiment weighing on the single currency.
However, EUR exchange rates bounced back later in the week as vaccine optimism helped to offset some of the Euro’s coronavirus gloom.
Three Things to Watch Out for This Week
1. Brexit Developments
All eyes will be on UK-EU trade talks this week on hopes that a post-Brexit trade deal can be finalised before the upcoming EU summit. Expect to see the Pound surge if an agreement can be reached in time.
2. UK Inflation
Also in focus for GBP investors will be the UK’s latest CPI figures. Will a bump in inflation last month offer some support to Sterling?
3. European Coronavirus Cases
Across the channel we will likely see EUR investors remain preoccupied by Europe’s battle against the coronavirus
Looking ahead, it looks to be another choppy week of trade in the GBP/EUR exchange rate, with ongoing Brexit and coronavirus uncertainty likely to infuse fresh volatility into the pairing.