The GBP to EUR exchange rate was higher by 0.13% on Wednesday with the pair now trading at the highest level since late-November. The UK government is ramping up their vaccination schedule and this could see the Eurozone economies left behind.
GBP to EUR was trading at 1.1208 after breaching last week’s high at 1.1200. The next target would be the 1.1280 level.
BoE Warns of ‘Darkest Hour’ for UK Economy
The Bank of England governor has warned that the UK economy is facing its “darkest hour” due the latest virus outbreak. His comments came a day after Chancellor Rishi Sunak said, it “is going to get worse before it gets better”. Andrew Bailey said the country would bounce back, but only after the lockdown had ended and concerns about the spread of the virus had cooled.
The governor said unemployment, which he previously expected to peak around 7%-8% in the summer, would now be lower due to the extended furlough scheme.
Bailey also talked about a potential move to negative interest rates and Bailey said there were “lots of issues” with the policy which could hit banks.
“In simple economics and maths terms, there is nothing to stop it at all,” he said. “However, there are a lot of issues with it.”
The bank will meet early next month and 2021 could see talk of negative rates being a driver of the GBP to EUR exchange rate, but the European ban may move there first.
UK Pushing Ahead with Vaccination Plan
The UK government is ramping up its first phase of vaccinations, which aims to vaccinate 15 million people by 15th February. This will include frontline health workers, care home residents, and the over-70s.
The UK government is hoping to offer everyone over 50 a dose by the spring. More than 2.6 million vaccines have been given out already and this is a big part of the pound sterling gains this week as the Eurozone countries struggle to keep up with their own plan. The UK economy could see a quicker recovery than Europe if these trends continue and the pound could finally get a post-Brexit bounce.
The economic calendar is light for the day, but there is an early speech by European Central Bank (ECB) President Christine Lagarde. This will be followed by industrial production for the Eurozone with a reading of -3.3% forecast after last month’s -3.8%.
Tomorrow sees the release of ECB monetary policy minutes and this could give some insight into the next policy steps by the central bank. The EU economy is struggling with deflation and if the euro doesn’t drop organically then the bank may take action to lower it via policy moves or outright intervention.
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