Pound Euro (GBP/EUR) Exchange Rate Rangebound near One-Month High
The Pound Euro (GBP/EUR) exchange rate is trading in a narrow range this morning after surging to a one-month high yesterday.
A risk-on mood driven by easing Omicron variant fears fuelled the Pound’s gains but its rally has stopped this morning amid increasingly thin Christmas trade.
The prospect of tighter restrictions after Christmas and UK Covid-19 cases recording the highest daily figure since the start of the pandemic are limiting the Pound, with GBP/EUR trading at around €1.1820 at the time of writing.
Soaring UK Covid-19 Cases Weigh on the Pound (GBP)
The Pound (GBP) is lacking direction today after jumping on Thursday amid risk-on market trade buoyed by reports Omicron is less likely to cause hospitalisation than the Delta variant of coronavirus.
Results from an early real-world study from the UK “suggest that Omicron is associated with a two-thirds reduction in the risk of Covid-19 hospitalisation when compared with Delta”.
However, soaring UK Covid-19 infections and the threat of stricter coronavirus measures after Christmas have halted the Pound’s rally today.
Daily coronavirus cases in the UK hit a record high of 119,789 yesterday, 15,000 more than the previous high earlier in the week.
The soaring cases rate is fuelling the possibility of tighter Covid-19 restrictions after Christmas, as well as heightening concerns over UK economic activity.
The impact of Omicron fears have driven consumers away from high streets and hospitality, potentially weighing on UK economic growth at the end of the year.
Meanwhile, increased pressure on hospitals is also causing concern, with increasing numbers of NHS staff absent to due Covid-19 up by 54% on last week.
Health secretary Sajid Javid said:
“The NHS workforce was already under pressure before Omicron came along.
“There is increased pressure in many workforces at the moment, especially if someone needs to isolate if they have a positive case.”
Euro (EUR) Holds amid Thin Trade
The Euro (EUR) is steady this morning as many European markets have closed for the Christmas break.
Risk-on market trade is helping the single currency to make modest gains, as declining safe-haven demand weighs on the US Dollar and supports the Euro due to the negative correlation in the pairing.
Optimism that the Omicron variant is manageable is supporting upbeat market sentiment, with hopes of limited disruption to economic activity.
However, ongoing strict coronavirus restrictions in many European countries continue to weigh on EUR sentiment.
In addition, news that France has cancelled its order for Merck’s Covid-19 antiviral treatment pill due to lower efficacy than previously thought has also slightly knocked the Euro.
Pound Euro Forecast: Prospect of Tighter UK Covid Measures to Dent GBP?
The Pound Euro exchange rate looks set to remain in a narrow range going into the Christmas break.
GBP/EUR may experience volatility after Christmas as the prospect of tighter UK Covid measures lingers and threatens to disrupt economic activity going into 2022.
However, as the UK’s booster vaccination programme rolls out at an impressive pace, the UK may avoid severe restrictions, potentially supporting Sterling.
Meanwhile, the Euro will likely remain sensitive to market risk appetite in the absence of significant Eurozone data releases.
Soaring Covid-19 cases sweeping Europe causing stricter Covid measures in countries throughout the bloc could also weigh on EUR sentiment.