The GBPEUR exchange rate is trading near 1.1700 again after another attempt to test the yearly highs at 1.18 failed. The British and European economies have no major economic data ahead until Thursday’s Bank of England interest rate meeting and news headlines may drive the pair until then.
The GBP to EUR trades saw highs above the 1.1750 level last week but failed to hold the gains as the 1.18 yearly highs proved elusive.
UK cases fall but tensions rise
The pound struggled despite a fall in virus figures overall. New figures Sunday showed there were over 24,000 new cases recorded but this was 30% lower than a week earlier.
As cases fall, tensions rise, with football leagues and tory ministers turning against the virus plans. Some players in the Premier League and EFL are refusing to have coronavirus vaccines, which could lead to divided dressing rooms just days ahead of the new season.
It was feared that some players could miss the start of the new season, with the EFL starting on Friday night followed by the Premier League the following week. For the pound sterling, this will only add negative headlines when traders were looking for a real reason for sterling to trade at the yearly highs.
Boris Johnson was also facing a new backlash within his party over the “threat” of domestic vaccine passports, with demands for MPs to be recalled early from vacation to join debates on the proposal.
Andrew Bridgen, who is one of over 40 Conservative MPs to oppose vaccine passports, said Parliament should be recalled from its summer recess if ministers are “serious” about the proposal. Criticisms were also logged last week over a “stealth” change to the NHS app which was seen as a de facto vaccine passport.
The Liberal Democrats said that the change was also a reason to warrant a Parliamentary recall.
Pound sterling could lack support ahead of BoE
With no major economic data ahead until Thursday the pound will likely be a victim of its own recent success. The pair is lacking the extra catalyst to get to the yearly highs and bearish sentiment could set in as profit-taking emerges.
ING bank said the recent rise in coronavirus uncertainty is likely to halt any hawkish sentiment from the Bank of England on Thursday. Analysts expect policymakers to withhold any clues on when the first rate hike may appear. The bank also see it as unlikely that the BoE will provide any early tapering of stimulus.
They do however, see the potential to hear comments about the Bank’s future tapering plans, which will likely happen earlier in the future due to the recent surge in inflation. ING expect the first rate hike for the UK economy in early 2023.
The pound versus the euro will take support at 1.17 but that level is important after recent failures to get back above the 1.1750 mark.