The pound to euro exchange rate has started the week steadily against the euro with very little movement away from the 1.11 interbank rate of exchange, similar to where we saw the pairing spend most of last week.
The pound has also lost value against the dollar yet gained against the perceived riskier currencies, such as the Australian dollar, New Zealand dollar and South African rand, with exchange rates against the rand going up by almost 2% at the time of writing this post.
When movements such as this are seen it can generally be put down to global market sentiment, riskier currencies lase value and those perceived as safer haven currencies will tend to gain.
With the pandemic still taking an almighty grip on many nations around the world, even more notably with the new mutant strain it is not a great surprise to see this pattern occurring. Back in March last year when the markets realised just how bad COVID-19 appeared to be we saw the dollar gain significant value against Sterling and currencies such as the Australian dollar, New Zealand dollar and South African rand weaken.
So far the UK vaccine rollout appears to be gathering significant pace and it does still appear that the UK economy may be in pole position from those worst affected to come out of the traps in the coming months, but with the UK currently in a National lockdown which is expected to possibly continue for another two and a half months it is easy to see why investors may be steering clear of the pound at present.
The week ahead is fairly quiet in terms of economic data for the UK, with Friday having the release of trade balance figures and industrial and production manufacturing data being one of the highlights of the trading week.
There is a gathering focus on the Bank of England and whether or not they may seek to look at negative interest rates a little more now heading into 2021, so this is also another factor that has the potential to weight heavily on the pound in the short term. Negative interest rates are generally seen as bad for a currency as they make it less attractive to investors, so even heightened speculation of this happening could decrease the value of Sterling exchange rates.
The next Bank of England interest rate meeting is scheduled for 4th February so expect plenty of rumours and speculation of what may happen throughout this month.
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