GBP to EUR Awaits Inflation After Strong Week

GBP EUR Starts the Week with 1.1800 Test

The GBP to EUR rate closed the week at 1.2790 marking the highest close weekly close since May. The pound was able to shrug off weak GDP figures and the pair will now await inflation figures in the week ahead for both the UK and Europe.

GBPEUR has attempted to get above the current price level four times since June so a move higher will likely open up a new trend with the 1.1500 level ahead.

Inflation Data Will Guide in the Week Ahead

The week ahead will see the latest inflation release for the UK, Germany and the Eurozone. The UK core number is expected to rise to 1.3%, while the European number is expected to come in at 0.2%. Germany is still in deflationary territory at -0.3% and this number is expected to stay the same. The readings highlight the ECB’s struggle to meet their 2% target and Thursday’s ECB meeting minutes noted euro strength once more, saying:

“it was pointed out that the nominal effective exchange rate currently stood at an all-time high and that the recent appreciation could contribute significantly to the subdued inflation outlook”.

Some members of the ECB were critical of the euro’s strength in 2020 after a sell-off in the US Dollar. The single currency’s gains were seen as the factor dragging down the inflation rate. The minutes added that, “concerns were voiced over risks related to developments in the exchange rate that might have negative consequences for the inflation outlook”.

There had been talk of an intervention to tackle the higher euro and this is likely to cap any potential rise in the euro for 2021.

The UK saw a weak GDP figure on Friday with the latest growth numbers hit by the government lockdowns. The 2.6% drop in November means the country is 8.5% lower since before the pandemic began and the services sector saw its worst drop since records began in 1997. The UK services economy has been hit by the closure of travel and hospitality in the last year.

Chancellor Rishi Sunak said it was “clear things will get harder before they get better and today’s figures highlight the scale of the challenge we face.”

Traders are ignoring the latest growth figures as Europe’s largest economies also saw lockdowns for the period and the GBP to euro outlook is being decided by vaccines in the near-term.

Pfizer to Reduce Delivery of Vaccines Until February

US pharmaceutical company Pfizer announced yesterday that deliveries of its coronavirus vaccine will be temporarily reduced to the UK and Europe while it upgrades its production capacity in Brussels. The announcement is a blow for the planned rollout, but the European countries are currently lagging the UK and this has boosted GBPEUR.

The UK has already administered around 3 million shots of the vaccine and the government is on target to reach its target of 15 million doses administered by mid-February.