Pound to Euro Exchange Rate Rises as Hopes for ‘Prosperous Year’ Grow as UK Covid-19 Vaccine Rollout Gets Underway

Pound (GBP) Rises Despite Disappointing December Retail Sales

The Pound to Euro (GBP/EUR) exchange rate rose this morning, with the pairing currently fluctuating around €1.11.

Sterling rose slightly against the single currency today despite December seeing the biggest fall in retail sales since 1995.

The British Retail Consortium (BRC) said total sales had fallen by 0.3% last year despite rising online sales.

The BRC’s Like-for-Like Retail Sales for December also fell below forecasts to 4.8% instead of the forecast rise of 7.9%.

Raheel Ahmed, head of consumer products at Barclaycard, commented on the data:

‘With the latest government guidance to stay at home and a vaccine rollout on the horizon, we are all hopeful of a brighter and more prosperous year ahead.

‘Yet, for now, the reality of lockdown life remains and it’s once more a hugely challenging time for high-street retailers as well as the hospitality, leisure and travel industries.’

UK markets will be awaiting today’s speech from the Bank of England’s Deputy Governor, Ben Broadbent. He will be addressing the issue Covid-19 and the composition of spending.

Any negative comments about the outlook for Britain’s economy in the months ahead would limit Sterling’s gains.

If Mr Broadbent is optimistic about the coronavirus vaccine rollouts, however, we could see the GBP/EUR exchange rate head higher.

Euro (EUR) Falls as Concerns Grow Over Europe’s Slow Start to Covid-19 Vaccine Rollouts

The Euro (EUR) fell today over concerns that Europe has gotten off to a slow start in rolling out the Covid-19 vaccines.

As a result, EUR traders are becoming concerned that the Eurozone’s economic recovery could be delayed until later this year.

Cornelius Hirsch and Arnau Busquets Guardia, analyst at Politico, commented:

‘The European Union … kicked off on December 27, the start of the Commission’s declared “vaccination days.” But criticism is already rising as the vaccine strategies across the Continent lag behind schedule, leading to a blame game between the European Commission and several member countries.’

Meanwhile, Eurozone markets are becoming steadily more optimistic following reports that Germany – the Eurozone’s largest economy – is expected to grow by 3.5% in 2021.

However, BDI’s forecast is less optimistic than the German Governments, so some EUR traders are remaining cautious as the coronavirus epidemic unfolds.

GBP/EUR Forecast: Could Further UK Lockdown Restrictions Limit Sterling?

Euro (EUR) traders will be awaiting tomorrow’s publication of November’s Eurozone Industrial Production data.

Any improvement in the outlook for the bloc’s industrial and manufacturing sector would prove EUR-positive.

However, EUR investors will be closely monitoring tomorrow’s speech from Christine Lagarde, the European Central Bank’s (ECB) President.

If she is notably downbeat in her outlook for the Eurozone’s economy, then we could see the EUR/GBP exchange rate fall.

The GBP/EUR exchange rate will continue to be driven by the UK’s coronavirus news.

As a result, we could see Sterling begin to fall if Downing Street announces stricter lockdowns to curb the rapid pace of infections.

David Moore

Contact David Moore