The GBPEUR exchange rate was flat on Thursday after inflation numbers yesterday failed to spark the pound versus euro pair. The euro strengthened slightly after it printed similar numbers to the UK despite further behind on reopening. Further talk of the Indian variant of the virus is also weighing on sterling.
The GBP to EUR trades at 1.1590 after surrendering the 1.16 level on Wednesday.
Indian variant talk continues in the UK
UK Health secretary Matt Hancock told MPs on Wednesday that extra testing and vaccine supplies were being deployed in particular areas of the country to try to halt the spread of the Indian virus variant.
The latest increase in the virus came with the Government under fire over its failure to prevent the variant arriving in the UK, with Labour saying that the border has been “like a sieve” throughout the entire pandemic, which is obviously the case.
Mr Hancock reported almost 3,000 cases of the Indian strain had been identified, up 27 per cent from Monday.
“The race between the virus and the vaccine has got a whole lot closer,” Hancock said.
Bolton, Blackburn and Bedford have been the main areas of concern but authorities in other areas are also taking precautions. Jonathan Van-Tam has said that the Indian variant is more transmissible than the Kent variant which caused the winter lockdown, but data won’t say by how much until next week.
Inflation numbers take pressure off the BoE
The Bank of England Governor Andrew Bailey said yesterday that he expects a spike in inflation”’in the next month or so” but that any rise in prices would be temporary.
Bailey told the Economic Affairs Committee that the Bank’s inflation forecast is for prices to “pick up” in the near future as the economy bounces back from lockdown. He added that he does not see any evidence to suggest that the increase will persist.
Bailey said inflation had been, “…under one per cent for my entire time as governor. Every opportunity I have had to write a letter to the Chancellor, to explain why inflation is more than one per cent below target, I have had to take.”
A strong shift in energy prices has been blamed for the rise but the bank sees that coming down in the medium term. Yesterday saw a slight increase in the expected inflation numbers for the UK, however prices have doubled on a monthly basis as the economy reopens. Traders backed off from any further bets on the pound as the BoE won’t feel pressured by the latest release and markets will be more concerned about virus cases as the Indian strain of the virus continues to take hold in certain areas of the country.
The GBPEUR has support at 1.1500 and may be quiet for the rest of the trading week with no further daya releases scheduled that could drive the pair.