Pound to Euro Exchange Rate Rangebound on UK’s ‘Cautious but Irreversible’ Lockdown Easing Plan
The Pound to Euro exchange rate held steady this morning after Prime Minister Boris Johnson said that low rates of the coronavirus were key to easing the national lockdown. The pairing is currently trading around €1.14.
Yesterday saw the Pound rise after Boris Johnson announced a plan for a controlled easing of Covid-19 restrictions, describing the process as ‘cautious but irreversible’. Johnson added:
‘[We would] like to see the rates of infection come down very low indeed … we’ll want to see those rates really, really low.’
However, concerns over a new Covid-19 variant in the UK have dampened confidence in the potential efficacy of vaccines going forward.
Dr Simon Clarke, an associate professor of cellular microbiology at the University of Reading, explains:
‘We don’t yet know how well this [new] variant will spread, but if it is successful it can be presumed that immunity from any vaccine or previous infection will be blunted.’
Nonetheless, with over 15-million people in the UK having received the coronavirus vaccine, GBP investors are hopeful that this could accelerate the nation’s economic recovery in the months ahead.
Euro Steady Ahead of GDP Report
The Euro stabilised against the Pound today ahead of the publication of the Eurozone’s flash Gross Domestic Product (GDP) data for the final quarter of 2020.
However, Eurozone markets are remaining cautious as the outlook for the bloc’s economy is largely downbeat, with lockdowns having weakened growth throughout the final quarter of last year.
Authors Bert Colinjn, Joanna Konings, and Timme Sparkman, commenting for ING, said:
‘GDP growth in the fourth quarter of 2020 remained surprisingly strong despite a second wave of the coronavirus. Eurozone GDP fell by just -0.7%, while Germany, Belgium and Spain even posted positive growth rates.
‘The smaller drop in GDP compared to the first wave is related to a variety of factors. The rest of the world was more open in the second wave, industry and construction was kept open in some countries, online solutions were adopted where possible and the decline in mobility was smaller.’
Any signs that the Eurozone’s GDP data outperforming forecasts, however, would buoy the EUR/GBP exchange rate.
Today will also see the release of February’s Eurozone ZEW Survey of Economic Sentiment.
Any improvement in the outlook for the Eurozone’s economy would also be EUR-positive.
Forecast: UK Inflation Data in Focus
Pound traders will be awaiting tomorrow’s release of January’s Consumer Price Index. If this presents a positive picture of the UK’s economy in the months going forward, then Sterling would rise.
GBP investors will also continue to monitor the UK’s Covid-19 situation. If Covid-19 vaccinations continue to speed ahead and cases of the virus drop, then we would see the Pound head higher.
Meanwhile, Euro traders will be monitoring tomorrow’s latest data of concerning the Eurozone’s Construction Output.
Any signs that the Eurozone’s economy is on the road to recovery would be EUR-positive.