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Euro Pound Exchange Rate Dips Amidst UK Announcement of Fresh COVID-19 Measures

Euro Pound (EUR/GBP) Exchange Rate Trends Downward After UK Implements New COVID-19 Restrictions

The Euro Pound (EUR/GBP) Exchange Rate climbed overnight following the UK government’s announcement of further COVID-19 restrictions, but has trended downward since the opening of this morning’s session.

At time of writing the EUR/GBP exchange rate is at around £0.8573, which is roughly -0.2% down from this morning’s figures.

Pound (GBP) Falls as UK Introduces New Covid Measures

The Pound (GBP) has fallen today following the UK government’s announcement of new measures in order to combat the spread of the Covid-19 Omicron variant. GBP is currently at its lowest point against the US Dollar since December 2020.

In a press conference on Wednesday evening, Prime Minister Boris Johnson stated that he would be enacting the country’s ‘Plan B’ restrictions. These measures include working from home where possible, mandatory facemasks in public, and vaccine passports for large venues such as nightclubs.

Reaction to the news in the markets has seen shares in hospitality and travel companies slide, with many small businesses in the UK concerned about the impact the new restrictions will have on their trade in a normally busy time of year.

Kate Nicholls, chief executive of UKHospitality, underlined the need for additional government support to ensure that businesses were supported this winter:

‘While the government clearly acknowledges that hospitality is safe and can continue to host celebrations in the lead up to Christmas, the measures announced today will significantly impact consumer confidence and be particularly devastating to city and town centre venues.’

Euro (EUR) Stumbles as ECB Considers Continued Bond-Buying

The Euro (EUR) has dipped slightly this morning after climbing against a weakened Pound overnight  to its highest point since November.

The Euro’s losses today may have been mitigated by news that October saw a significant rise in exports from Germany, the area’s largest trading bloc. Exports in the region rose by 4.1%, the strongest pace in a year, although raw material shortages continue to hamper the manufacturing sector.

News that the European Central Bank (ECB) is meeting to discuss a temporary extension of its bond-buying programme is likely to be the cause for the negative market sentiment surrounding the currency this morning.

Despite debate between the doves and hawks currently sitting on the ECB’s board over the move, even more hawkish members have admitted that going ‘cold turkey’ over bond purchases would be risky in the current climate. If the ECB follows through on the move at its 16 December meeting, then it could further delay the next rate hike from the bank and push the Euro downward.

EUR/GBP Exchange Rate Forecast: Will Fall in UK GDP Further Undermine Pound?

Looking to the week ahead, UK GDP figures on Friday are forecast to that report growth slowed in October after having risen for two consecutive months. Coupled with Wednesday’s announcement of new COVID-19 restrictions, these figures could see confidence in the UK’s economic recovery further undermined and may push Sterling downward.

In regards to the Euro, Friday will see a number of speeches from ECB board members including president Christine Lagarde. Investors will be keenly watching these speeches for any hints of policy ahead of the central bank’s next meeting on 16 December.