Pound Sterling Euro (GBP/EUR) Exchange Rate Buoyed by Coronavirus Vaccine Hopes
UPDATE: The Pound Sterling Euro (GBP/EUR) exchange rate edged rallied by 0.6% on Monday afternoon. This left the pairing trading at around €1.1054.
The Pound rebounded from a 20-day low against the single currency this afternoon. However, traders remain bearish about the UK’s dire economic outlook and Brexit risks.
Sterling received a boost after the first human trials of coronavirus vaccine being developed by AstraZeneca and Oxford University was safe.
The first human trials showed the vaccine produced immune system responses and buoyed hopes a vaccine would be available by the end of the year.
Prime Minister Boris Johnson noted the results were ‘very positive news’. However, researchers have noted the project was still at an early stage.
According to vaccine developer, Sarah Gilbert:
‘There is still much work to be done before we can confirm if our vaccine will help manage the COVID-19 pandemic.
‘We still do not know how strong an immune response we need to provoke to effectively protect against SARS-CoV-2 infection.’
Pound Sterling Euro (GBP/EUR) Exchange Rate Muted as EU Talks Could Soon Fall Apart
The Pound Sterling Euro (GBP/EUR) exchange rate edged lower on Monday morning. This left the pairing trading at around €1.0976.
The single currency remained flat this morning after press reports suggested the latest round of EU negotiations failed.
Commenting on this, Chris Weston, head of research at Pepperstone brokerage noted:
‘I think expectations were that we weren’t going to get a deal at this meeting anyway, but we needed enough in it to give us a belief that there was one coming in August or September.’
Talks concerning the €750 billion bill were unsuccessful. Although the Netherlands, Austria, Denmark and Sweden, also known as the ‘frugal four’, were satisfied with a different arrangement.
Reports suggest they are happy with allocating around €390 billion as grants and the rest as low-interest rate loans.
While EU leaders were making progress after three days of negotiations, discussions could soon fall apart. However, the progress allowed the Euro to rise to a four-month high against the US Dollar.
Dutch Prime Minister Mark Rutte has warned this could be a possibility and talks had been close to falling apart. He noted that European Union Chairman, Charles Michel was working on a new compromise proposal.
Speaking to Reuters reporters in Brussels, Rutte noted:
‘We are not there yet, things can still fall apart. But it looks a bit more hopeful than at the times were I thought last night that it was over.’
Although, diplomats have said the leaders could abandon the summit and try again next month if talks fail.
Meanwhile, the European Central Bank’s (ECB) chief, Christine Lagarde noted it would be better for leaders to agree on an ‘ambitious’ package than to have a quick deal at any cost.
‘Ideally, the leaders’ agreement should be ambitious in terms of size and composition of the package […] even if it takes a bit more time.’
Sterling (GBP) Muted as Attention Turns to Fifth Round of Brexit Talks
The Pound remained flat on Monday morning as markets received some support from the EU leaders’ meeting.
Market attention will soon turn to the latest round of trade negotiations between the UK and EU.
The fifth round of talks is due to begin in London and the Prime Minister has been pushing for a deal to be agreed sooner. Although, traders are likely to focus on the lack of progress which may weigh on Sterling.
However, the currency received some support after reports revealed Britain had signed deals to secure 90 million doses of two potential coronavirus vaccines.
The business ministry said it had secured 30 million doses from vaccinations from Pfizer Inc and BioNTech alliance. It also confirmed it made a deal with French group Valneva for 60 million doses.
Commenting on this, business minister, Alok Sharma noted:
‘This new partnership with some of the world’s foremost pharmaceutical and vaccine companies will ensure the UK has the best chance possible of securing a vaccine that protects those most at risk.’
Pound Euro Outlook: EU Leaders Meeting Remains in Focus
The riskier Pound (GBP) could strengthen against the Euro (EUR) if investor sentiment improves on reports of another US coronavirus aid bill.
Attention will turn to the US as the battle in the US Congress is set to continue this week as Republicans and Democrats push for another aid bill. If reports are optimistic, it will boost risk appetite which will offer Sterling support.
Meanwhile, the single currency could suffer losses on any downbeat reports about the ongoing EU leaders meeting.
If further reports show talks are close to falling apart it will weigh on EUR and send the Pound Euro (GBP/EUR) exchange rate higher.