The GBPEUR exchange rate is flat at lunchtime on Thursday after a sharp two-day sell-off. After pushing to yearly highs of 1.18 on Monday, sterling bulls have been steamrolled with a move to 1.1573. As was expected, the UK’s fast rollout of vaccinations has not been capitalised in full by the country’s government and the UK will trudge forward on Boris Johnson’s roadmap, while the EU catches up on vaccines.
GBPEUR could fall further if buyers don’t emerge here and the 1.15 level is the next target for the euro.
Funds Unwind Sterling Long Positions
Data from the Commodity Futures Trading Commission showed that leveraged funds’ positions in the British Pound were at their highest in over a year. Hedge funds were moving into sterling on the basis of the economic outlook between the UK and the EU, but that trade has hit a roadblock.
The move lower in the Pound comes despite another economic upgrade from the IMF. Britain’s growth for 2021 is expected to come in at 5.3% versus previous expectations for 4.4%.
Another headwind for the UK is a slowing in the vaccination campaign as vaccination centres and pharmacies face a “significant reduction” in supply. This will mean that older age groups are prioritized but the virus was predominantly affecting those groups and it should be less of an issue with the number of patients that have received vaccines in the UK.
A study from the University College London has also said today that the UK will reach herd immunity “within days”. The government has missed an opportunity to take advantage of the vaccine campaign and reopen its businesses, with a chance to support the airline industry.
UK Card Spending at 88% of Pre-Virus Levels
British household spending on credit and debit cards has risen to 88% of its pre-virus average in the week to April 1st, a 10% increase from the prior week. The Office for National Statistics said:
“This increase was partly driven by the usual increase in ‘staples’ seen around the turn of the month, as well as a continued increase since early 2021 in the value of CHAPS payments received by large UK corporates”.
The numbers also hint that consumers are gaining confidence in spending as they get closer to a reopening of the economy.
The European Central Bank will release the minutes of its latest monetary policy meeting, but it may not have any new surprises. Inflation numbers have cooled from the spike in bond yields around a month ago and there is no requirement to discuss any imminent support for the European economy. ECB head Christine Lagarde said today in Brussels that risks in the Eurozone have become “more balanced” but reiterated that the bank would utilise the full capacity of its 1.85 trillion euro response package if required.
The GBPEUR is licking its wounds from the recent price dump and may consolidate until further information is available on the path of the UK and EU economies.
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