GBP/EUR Exchange Rate Increases as Confidence Grows in UK Covid-19 Vaccination Programme
The Pound to Euro exchange rate rose today after UK inflation rose by 0.7%, buoyed by sales of furniture, food, and household goods. The pairing is currently fluctuating around €1.15.
Michael Hewson, an analyst at CMC Markets, was more cautious about the UK’s inflation report, however, saying:
‘Combined with sharp rises in energy and commodity prices there is rising concern that higher prices will not only choke off any post pandemic recovery, due to higher borrowing costs, but they could also crimp future consumer spending due to higher living costs.
‘This caution appears to be manifesting itself into this morning’s European open, which looks set to be a mixed one, with Asia markets also trading in a similar fashion.’
Sterling has also continued to rise as the UK Government’s Covid-19 vaccination programme appears to be on schedule after hitting a 15-million milestone last week.
Currently 23.3% of the UK has received at least one dose of the coronavirus vaccine, while daily cases are down by -1,739 compared to last week.
As a result, GBP investors are becoming more confident about the outlook for Britain’s economy.
The swift vaccine rollout expected to help the nation ease lockdown restrictions in the months ahead.
Euro Sinks Despite ‘Light at the End of the Tunnel’ for Eurozone Economy
The Euro fell against the Pound today after yesterday’s publication of the flash Eurozone Gross Domestic Product (GDP) fell by -0.6%. As a result, EUR traders are becoming increasing worried about the outlook for the bloc’s economy.
European Commissioner for the Economy Paolo Gentiloni commented:
‘There is, at last, light at the end of the tunnel. As increasing numbers are vaccinated over the coming months, an easing of containment measures should allow for a strengthening rebound over the spring and summer. The EU economy should return to pre-pandemic GDP levels in 2022, earlier than previously expected.’
However, yesterday also saw the publication of February’s Eurozone ZEW Survey of Economic Sentiment, which beat forecasts and rose to 69.6.
ZEW President Professor Achim Wambach commented on the report:
‘The financial market experts are optimistic about the future. They are confident that the German economy will be back on the growth track within the next six months. Consumption and retail trade in particular are expected to recover significantly, accompanied by higher inflation expectations.’
GBP/EUR Forecast: Eurozone Consumer Confidence Data in Focus
Euro investors will be awaiting tomorrow’s release of the Eurozone’s latest Consumer Confidence report for February. If this confirms forecasts and falls, however, then we could see the single currency begin to suffer.
Tomorrow will also see the publication of the European Central Bank’s (ECB) Monetary Policy Meeting Accounts. Any signs of dovishness from the ECB, however, would be EUR-negative.
Pound investors will be awaiting tomorrow’s speech from the Bank of England’s (BoE) Michael Saunders.
If Saunders is markedly confident about the UK’s economy and Covid-19 vaccine rollout, then we could see Sterling head higher.