EUR/GBP Exchange Rate Rangebound as UK-EU Tensions Rise Over Coronavirus Vaccines
The Euro to Pound exchange rate held steady today, with the pairing currently trading around £0.88.
Sterling rose struggled to rise against the single currency today as the UK’s Covid-19 infection rate, although falling, is still putting immense pressure on the NHS.
Consequently, GBP investors are concerned that hospital admissions could further delay the UK’s easing of lockdown measures in the months ahead.
Paul Elliott, professor of epidemiology at Imperial, warned that we ‘really need to get prevalence down more quickly because the pressure on the NHS is very extreme right now.’
Tensions between the UK and the EU, however, are weighing on confidence in Sterling.
Stella Kyriakides, the EU’s Health Commissioner, has dismissed AstraZeneca’s claim that it is contractually obliged to supply the coronavirus vaccine to the UK first.
As a result, GBP investors are becoming increasingly jittery over prospects of a deterioration of UK-EU trade relations so soon after Brexit.
Nonetheless, a UK Government spokesperson attempted to reassure markets that UK vaccine access would be unaffected by UK-EU conflict.
The spokespersons said:
‘We have deals in place with seven vaccine developers that will ensure our supply ‘continues to grow as we rapidly expand the rollout in the weeks ahead.’
Euro Steady as Portugal Enters ‘Worst Moment’ of Covid-19 Crisis
The Euro held steady against the Pound today following reports that Portugal is facing its ‘worst moment’ of the Covid-19 crisis, according to the Portuguese Prime Minister, António Costa.
‘There’s no point in feeding the illusion that we are not facing the worst moment. And we’ll face this worst moment for a few more weeks, that is for sure.’
As a result, EUR traders are becoming increasingly worried about the Eurozone’s Covid-19 crisis, which could further limit the bloc’s economic recovery in the months ahead.
In Eurozone economic news, today saw the release of the latest Eurozone Consumer Confidence report for January, which confirmed forecasts and fell by -15.5.
Today also saw the publication of the flash German Harmonised Index of Consumer Prices for January, which beat forecasts and rose by 1.6%.
ING economist Carsten Brzeski commented:
‘Today’s inflation number is just the beginning of a period of significantly higher headline inflation in Germany … With price mark ups in some sectors once the economy starts to reopen again, headline inflation in Germany could be pushed above 2% after the summer.’
But with the Eurozone facing increasing economic uncertainty as Covid-19 vaccination struggles to kick off and infection rates rise in several countries throughout the bloc, EUR traders are remaining cautious.
EUR/GBP Outlook: Could Falling UK Covid-19 Cases Boost Sterling?
Euro investors will be looking ahead to tomorrow’s release of the German GDP data for the fourth quarter.
If this paints a bleak outlook for the Eurozone’s largest economy, then we will see the single currency suffer.
Tomorrow will also see the publication of Germany’s Unemployment Rate data for December. If joblessness rises in Germany, then the EUR/GBP exchange rate could fall.
Meanwhile, the Pound will be determined by the UK’s Covid-19 developments.
If Covid-19 infection rates continue to drop and the UK’s vaccination programme appears to be on schedule, we could see Sterling head higher against the single currency.