The GBPEUR exchange rate sank on Tuesday as traders returned from the Easter holiday and decided that the Prime Minister’s roadmap was fully priced into the pair. European data hasn’t been sparkling and the continent is struggling with virus lockdowns, but they did start pushing harder with vaccine delivery.
The GBP to EUR slumped below the 1.17 level after testing the 1.18 price on Monday and traders decided that was enough for now and took profits on the pound.
Clouds Gather Over PM Johnson
UK Prime Minister Boris Johnson was under pressure yesterday as opposition leaders and Tory rebels began to push back on his vaccine passports idea. The 70-strong Covid Research Group (CRG) criticised the goal for vaccine IDs, saying they were “incompatible with freedom”.
Liberal Democrats and Labour MPs also said they would be unable to back the idea in its current format and risked creating a “two-tier society”. Another Johnson plan is facing criticism after it emerged that a family of four could end up spending £600 on a holiday to a green list country just for testing. This would be after vaccinations of course. The Prime Minister has said that he will look at cheaper testing, but the EasyJet CEO said that PCR tests were too expensive to make holidays a viable option.
Speaking to the The Telegraph, Johan Lundgren said: “In many cases, those costs are actually higher than the fare of the ticket… if you are ticking all of those boxes to become a green destination multiple tests don’t make sense to me.”
For the British pound versus the euro, traders are starting to question the destination of Boris Johnson’s roadmap. After vaccinating more than half of the country, the expectation was that the curtain would be lifted on lockdowns, with services businesses and foreign travel resuming once more. What’s happening instead is layers of red tape and continued rules, while the Prime Minister has even hinted at pushing vaccine passports without approval from the commons.
Traders are now giving the euro the benefit of the doubt and are taking a more cautious approach on sterling over fears that Boris will waste the vaccine head start.
PMIs Highlight a Quiet Day For Data
The economic calendar sees services Purchasing Manager’s Index (PMI) data for some of the key economies with the UK, Germany, Spain and Italy updating on their services sectors. This is always a more important figure for the UK, while manufacturing leads in Germany. Last month saw services at 49.6 in the UK with hopes for a strong 56.6 reading this month. The European numbers are set to come in around the 50 mark which is the line in the sand between expansion and contraction.
Yesterday saw weaker employment rates in Italy and the Eurozone but the single currency was spared further losses.
GBPEUR is trading flat in early Wednesday trading at 1.1635 but yesterday’s bearish move could see further selling emerge.
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