GBP/EUR Exchange Rate Falls as UK Awaits Further Covid Updates
The Pound to Euro exchange rate dipped this morning, with the pairing currently fluctuating around €1.13.
Sterling fell today following news that UK ministers could further tighten border controls over fears about South Africa’s Covid-19 variant.
UK Health Secretary Matt Hancock is expected to make a statement today, with passengers arriving in the UK likely facing compulsory tests for the coronavirus while under quarantine.
George Eustice, the Environment Secretary, commented:
‘Introducing testing during that quarantine period is an additional way of keeping track of where people are, and monitoring the development of the virus, for those who have it, as they arrive.’
As a result, GBP investors are becoming more concerned about the South African Covid-19 variant.
Recent reports also show that the Oxford-AstraZeneca vaccine being only 10% effective against the new mutation.
Today also saw the announcement of a new Kent Covid-19 variant being discovered in Manchester.
Labour leader Keir Starmer commented on the new variants:
‘These variants, especially the variants that are found to be resistant to the vaccines that we’re currently rolling out, of course are a worry.’
GBP investors are remaining cautious until further news on the UK’s Covid-19 situation.
Meanwhile, in UK economic news, today saw the release of the BRC Retail Sales report for January, which beat forecasts and rose by 7.1%.
Analysts at Bloomberg were gloomy, however, saying that the outlook for retail sales is grim.
‘England’s third lockdown hit non-essential retailers harder than the previous one in November, with the new variant of the coronavirus hampering spending and confidence last month, according to the British Retail Consortium.’
Euro Rises as Germany’s Exports Beat Forecasts in December
The Euro rose today following the publication of Germany’s latest exports figure for December, which beat forecasts and rose by 0.1%.
Analysts at Reuters said:
‘German exports rose in December as solid trade with China and the United States helped Europe’s largest economy as it struggles to grow under the restrictions of a lockdown aimed at suppressing the COVID-19 case load.
‘Seasonally adjusted exports edged up 0.1% on the month after an increase of 2.3% in November, the Federal Statistics Office said on Tuesday. Imports fell 0.1% after an increase of 5.4% in the prior month.’
Today also saw the release of the French Industrial Output data for December, which rose from -0.9% to 0.4%.
As a result, EUR investors are becoming more confident about the Eurozone’s economy, with Germany – the bloc’s largest economy – showing encouraging signs of recovery.
However, Eurozone markets are cautiously optimistic, with the Europe’s Covid-19 vaccination programme lagging behind the UK and several other countries.
Outlook: Could a Dovish ECB Drag Down the Euro?
Euro traders will be awaiting tomorrow’s speech from the European Central Bank’s (ECB) Vice President, Luis De Guindos.
Any downbeat comments about the outlook for the Eurozone’s economy, however, would be GBP-negative.
Tomorrow will see the publication of the UK’s RICS Housing Price Balance for January. If this shows an improvement in the UK’s economy, then Sterling could head higher.
However, the GBP/EUR exchange rate will continue to be driven by UK Covid-19 news.
Any further signs of Covid-19 variants presenting a threat to the vaccination programme would be GBP-negative.