Pound Euro Exchange Rate Dips as UK Lockdown Drags Down Economic Sentiment

GBP/EUR Exchange Rate Struggles Ahead of BoE Speech

The Pound to Euro exchange rate fell this morning, with the pairing currently fluctuating around €1.12.

Sterling struggled against the Euro this morning despite Prime Minister Boris Johnson telling businesses that the Covid-19 vaccine is the best way out of the recession.

However, UK markets are concerned about the ongoing nationwide lockdown’s impact on the economy going forward.

GBP investors are optimistic about the accelerating pace of the Covid-19 vaccine rollout, after Downing Street said that the vaccine could be offered to all adults by September.

Boris Johnson said:

‘I think actually the whole of the UK is going very well. And, overall, the pace of the rollout is very encouraging.’

Pound traders will be awaiting today’s speech from Andrew Haldane, the Bank of England’s (BoE) Chief Economist.

Any downbeat comments about the outlook for the British economy, however, would be GBP-negative.

Euro (EUR) Edges Higher as German Economic Sentiment Rises in January

The Euro rose today following this morning’s release of Germany’s ZEW Survey of Economic Sentiment for January, which beat forecasts and rose to 61.8.

As a result, EUR has benefited from an improving outlook for the Eurozone’s largest economy.


Today also saw the release of December’s German CPI data for December, which confirmed forecasts and remained in negative territory at -0.7%.

However, news that European car sales had plunged during the Covid-19 crisis has left some EUR investors jittery about the outlook for the Eurozone’s economy going forward.

European industry body ACEA reports:

‘Containment measures – including full‐ scale lockdowns and other restrictions throughout the year – had an unprecedented impact on car sales across the European Union.

‘2020 saw the biggest yearly drop in car demand.’

Pound to Euro Outlook: UK and EU CPI Data in Focus

Sterling investors will be awaiting tomorrow’s publication of December’s year-on-year UK CPI data.

Any signs of improvement in the UK’s economic outlook for 2021 would be GBP-positive.

However, GBP traders will continue to monitor the UK’s Covid-19 vaccination programme.

If this boosts confidence in the nation’s ability to recover its economy this year, then we would see the Pound rise.

Euro traders will be awaiting tomorrow’s release of the Eurozone’s CPI data for December.

However, if this paints a bleak outlook for the bloc’s economic recovery going forward, the EUR/GBP exchange rate could begin to fall.



David Moore

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