Pound to Euro Ends a Mixed Week with Inflation Gains

GBP EUR Higher Ahead of PMI Business Activity

The pound to euro exchange rate ended the week higher after a Monday drop. The week started with a sell-off after the euro took advantage of the latest UK lockdown. This was balanced later in the week by disappointing Eurozone inflation figures.

The UK reported another record high in fatalities attributed to the coronavirus and this will weigh on the pound in the near-term as the government attempts to make a big push with vaccination facilities.

The pound to euro exchange rate finished the week with a price of 1.1099 after opening the week near 1.1200.

London Mayor Declares the Virus Situation Critical

London’s mayor has said that the capital’s coronavirus situation was “critical” as the country recorded its highest daily death toll since the outbreak began. The country reported that another 1,325 people had “died within 28 days of a positive test” and the news came hours after a third vaccine was approved for emergency use. Britain now has the highest count in Europe, and this is continuing to sour the outlook for sterling.

The UK regulator approved the Moderna vaccine and the country has ordered 17 million doses, on top of the millions that have already been placed for the Pfizer and Oxford vaccines. The government was set to open 1,200 vaccine centres and this may help to see the country back open by the second quarter.

Inflation Figures Weigh on the Euro

The early-week gains for the euro faded after mixed data for the economy. Germany saw strong industrial orders, but they also continued to see weak inflation. This was worsened by the European inflation number which was expected to remain at -0.2% but slipped to -0.3%. This is an important number because the European Central Bank (ECB) blamed the strong price of the single currency for the weak prices. 2021 may see the ECB taking action to tackle the deflation issue. Large stimulus on its own is not having the desired effect and some form of disguised intervention may be possible.

Next week will see the release of Gross Domestic Product (GDP) data for the pound sterling and this could be the driver for the pair, but the British currency is still being crippled by the current lockdown situation. The French government also extended their border restrictions with the UK this week and the German government also extended their own lockdowns so there is a fine balance in the pound to euro rate.

The GBPEUR closed below the 50-day price average at 1.1099 and the target for next week will be 1.1200 on the upside and the 1.100 for euro strength. If you’d like to discuss these factors further and find out more about how they could impact your upcoming currency exchange, feel free to get in touch using the form below to ask a question.