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Euro to Pound Exchange Rate Falls as Sterling is Boosted by UK Covid-19 Vaccine Hopes

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EUR/GBP Exchange Rate Sinks as UK Covid-19 Vaccine Roll Out Buoys Demand for Sterling

The Euro to Pound exchange rate fell this morning, with the pairing currently fluctuating around £0.88.

Sterling hit a eight-month high against the Euro today following the Presidential Inauguration of the now 46th President of the United States, Joe Biden.

Markets reacted positively to the news, with hopes that Biden will announce a major US stimulus package which will help the global economy’s recovery from the impact of the Covid-19 crisis.

The Pound has also been uplifted by growing confidence in the UK’s speedy Covid-19 vaccination rollout.

Lee McDarby, managing director of UK International Payments at MoneyCorp, explains:

‘In the UK, the fast vaccination rollout currently underway could provide a much needed lift to the UK economy, spurring a surge in the Pound. When it comes to the US dollar, many forecasters are predicting a large sell off should the vaccine be successful. This move to risk on would open the door to safe haven selling.’

Today also saw Gavin Williamson, the Secretary of State for Education, say that he hopes schools can return before Easter.

As a result, GBP investors are more hopeful that falling Covid-19 infection rates and easing pressure on the NHS could provide a lifeline for the British economy in the months ahead.

Euro Falls as Covid-19 Infections Rise Throughout the Eurozone

The Euro fell today as the outlook for the Eurozone’s economy continues to deteriorate because of rising Covid-19 cases throughout Europe.

Germany – the Eurozone’s largest economy – will also face an extended lockdown.

Michael Hewson, an analyst at CMC Markets, commented:

‘We’ve already heard in the last few days that Germany is extending its lockdown into mid-February, while curfews have been implemented in France and the Netherlands, while yesterday it was being reported that bars and restaurants in France were more than likely expected to remain closed until Easter, even under the most optimistic scenario.

‘This would appear to suggest even more economic pain in the weeks and months ahead, at the same time as the vaccine program gets off to a faltering start.’

Today will see the European Central Bank (ECB) announce its interest rate decision, which is expected to hold at 0%.

However, with much of Europe suffering from rising cases of Covid-19, a dovish policy statement would drag down the EUR/GBP exchange rate.

EUR/GBP Outlook: UK Services PMI in Focus

Pound traders will be awaiting tomorrow’s publication of the flash UK Services PMI for January.

Any improvement in the UK’s largest sector would boost the Pound to Euro exchange rate.

Tomorrow will also see the release of December’s retail sales for December. If these show a significant increase on the previous months, then Sterling will rise.

UK Consumer Confidence data for January will also be in focus.

However, if these are notably downbeat, then we could see GBP lose some of its appeal.

Euro traders will be looking to tomorrow’s publication of the Eurozone’s Markit PMI Composite figure.

If this points to a significant downturn in the Eurozone’s economy, then we would see the single currency suffer.