The Pound to Euro (GBP/EUR) exchange rate trended broadly higher last week, as Sterling continued to garner support thanks to the UK’s vaccination success.
What’s Been Happening: Pound Firms amid ‘Vaccine Trade’
The Pound initially got off to a slow start last week, before catching some strong bids against the Euro on Tuesday on the back of an upbeat jobs report, with GBP investors particularly cheered by some strong wage growth figures.
But, Sterling quickly began to falter in mid-week trade after Boris Johnson’s announcement that schools in England would remain closed until at least 8 March, dampened hopes for the national lockdown being eased this month.
The Pound then fluctuated through the second half of the week as optimism over the success of the UK’s vaccination programme was offset by supply concerns, as a bitter row broke out between the EU and UK vaccine producer AstraZeneca.
The euro, meanwhile, stumbled through the first half of last week, on the back of a worrying fall in German business morale at the start of 2021, in addition to some Italian political drama.
However, the single currency was able to recoup some ground later in the week, being bolstered by some stronger-than-expected Germany inflation and GDP figures.
Three Things to Watch Out for This Week
- Coronavirus Headlines
The coming week is likely to see coronavirus headlines continue to drive movement in the GBP/EUR exchange rate, with the ongoing vaccine supply row between the EU and AstraZeneca potentially infusing volatility in the pairing.
- Eurozone GDP
Also in focus in the first half of the week will be the publication of the Eurozone’s latest GDP figures. Will Germany’s upbeat GDP release be reflected in a smaller-than-expected contraction of growth in the wider bloc at the end of 2020?
- BoE Rate Decision
In the spotlight for GBP investors this week will be the Bank of England’s (BoE) February rate decision. No policy changes are expected from the BoE this month, but the Pound may be bolstered if Governor Andrew Bailey reiterates his opposition to negative interest rates.
GBP/EUR Forecast
Looking ahead, the GBP/EUR exchange rate could fluctuate again this week as vaccination nationalism between the UK and EU becomes increasingly concerning.