GBPEUR Gains on Inflation as France Extends Border Blocks

GBPEUR - Brexit Negotiations Commence 8th Round Next Week

The GBPEUR exchange rate was higher on Friday after the Eurozone saw continued weakness in inflation numbers. France announced today that they would continue the restrictions on UK visitors “until further notice”. The UK are set to open a raft of new vaccination centres next week in an attempt to move the program along.

GBPEUR was trading 0.46% higher in early trading with the pair pushing the 1.1100 level.

French Border Restrictions Extended for the UK

France made a move to extend the country’s border restrictions with the UK. The extension to the rules means that only lorry drivers and French or EU citizens with an essential travel reason will be allowed to enter the country. The measures will continue “until further notice” after the country reported a spread of the latest virus strain. France’s health ministry announced two new clusters with 19 people affected in Brittany. EU countries could begin using the Moderna coronavirus vaccine as early as next week after regulators approved the shot on Wednesday. The rise of the most recent virus variant is adding urgency to the EU’s actions.

EU Commission President Ursula Von Der Leyen announced another large order of the latest vaccine, saying:

“With the Moderna vaccine, the second one now authorised in the EU, we will have a further 160 million doses. And more vaccines will come”.

The outlook for the pound to euro rate will be largely dependent on how quickly the economies can reopen and this may be easier in the UK where only one country uses the same procedures, rather than the 27 EU nations battling their own spreads and logistics issues.

Inflation Figures Weigh on the Euro

Data for the European economy was mixed on Thursday with German Industrial Orders showing strength, while inflation for the overall bloc was weak. Machine orders in Europe’s largest economy were rising at a monthly pace of 2.3% against forecasts of a -1.2% drop.

This was followed by a gloomy inflation reading for December with headline inflation for Europe coming in at -0.3%, versus expectations for -0.2%. This will add to the stress that the ECB were feeling over deflation last year. The bank blamed a higher euro and threatened to take action on the matter, so that could be a driver for pound gains in the next three-to-six months. The continuation of lockdown measures in the German economy will add further weight to the deflationary tone and the ECB will be watching the numbers closely.

Resistance for the pound is at Monday’s highs near the 1.1200 level if it wants to see further gains for the rest of the month.

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