The GBP to EUR exchange rate is 0.15% on Tuesday after the pair had spiked to fresh highs for the year. The pound rallied against the euro to a high of 1.1755 but fell back to close under 1.17 again. There is risk of a pullback if sterling can’t mount a sustained improvement above the 1.17 level, but the GBPEUR is trading above the key level again this morning with German inflation figures due.
Vaccines Boost Roadmap Potential
Sterling saw gains on Monday as the country saw its first step out of the lockdown measures. The roadmap plan for reopening was boosted with further vaccine news as it emerged that the Moderna vaccine will arrive in the UK in April. UK Culture Secretary Oliver Dowden was confident that the UK remains “on course” for its original vaccination targets. The rollout was hampered by last week’s row with the EU and the GBPEUR rate fell on a potential two-month delay.
In Europe, only 10% have been vaccinated in the major countries and German MEP Nicolaus Fest said that the EU Commission President should resign for the “omnishambles”.
He said: “I’ve said it before and I’ll say it again, Ursula von der Leyen has no option left but to resign. Her handling of the vaccine scheme has been an omnishambles from the beginning”.
The UK was now looking at donating 3.7m doses to Ireland in an attempt to help Northern Ireland speed its own reopening. The GBPEUR exchange rate still hinges on the loosening of lockdown restrictions and Europe’s major economies have reversed into tougher restrictions.
German Inflation Leads the Data, Bundesbank Sees Contraction
Today will see the release of German inflation data with analysts expecting a reading of 1.7% versus last month’s 1.4%. Recent inflationary pressures have eased, and traders will probably be confident that the ECB has any initial price rises under control. The UK saw its own inflation lower last week on retail pressures and Germany’s continued lockdowns will weigh on its own readings.
The German Bundesbank has abandoned its expectations for a Spring rebound in Europe’s largest economy. In its latest monthly report, the bank cited the vaccine rollout and restrictions for the contraction.
“…economic output in the first quarter of 2021 is likely to decline sharply … particularly in the contact-intensive service sectors,” the bank said.
It was also noted that higher sales taxes, which were temporarily cut last year, would likely see a “substantial” decline in construction at the start of this year. The bright spot for the German economy has been in manufacturing, while exports to the UK were doing well. January’s post-Brexit trade figures saw exports slump, but this should even out to previous levels.
Today will also see consumer confidence figures from the Eurozone and France, but price action may be limited on that release.
GBPEUR needs to see a sustained move above the 1.17 level as this is becoming a stubborn resistance for the pound.
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