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Pound to Euro (GBP/EUR) Exchange Rate Dips as UK Covid-19 Infection Rates Soar

European Central Bank

Pound (GBP) Falls as UK Enters Worst Phase of Covid-19 Crisis

The Pound to Euro (GBP/EUR) exchange rate fell by just over -0.2% today, with the pairing currently fluctuating around €1.106.

Sterling struggled today despite openings of mass vaccination centres to further ensure that everyone in the top four vaccination priority groups will receive their jab by February 15th.

However, as Covid-19 cases escalate throughout England, there are fears that lockdown measures could be made stricter in the coming days.

Labour leader, Keir Starmer, said that current measures could be inadequate. Starmer told the BBC’s Andrew Marr show that they ‘may not be tough enough’.

Professor Chris Witty, the Government’s Chief Medical Adviser, also warned that the UK is now in the worst phase of the coronavirus crisis.

Mr Witty commented:

‘We’ve got to be very clear that we are now at the worst point of this epidemic for the UK. In the future we will have the vaccine, but the numbers at the moment are higher than they were in the previous peak by some distance. We’ve 30,000 people who are in the NHS, and that is still rising.’

As a result, GBP investors are becoming increasingly concerned that the rising number of Covid-19 cases could instigate further lockdown restrictions.

Meanwhile, UK markets are awaiting today’s speech from the Bank of England’ s (BoE) Governor, Andrew Bailey.

Any dovish commentary about the British economy would be GBP-negative.

Euro (EUR) Rises Despite Fears that France Could Close its Borders

The Euro (EUR) edged higher against the Pound today despite reports that France could close its borders.

A member of the French government’s scientific council, Arnaud Fontanet, warned against the influx of new coronavirus variants.

Fontanet said:

‘It is important that we consider whether we need to close the borders to a limited number of countries, notably the United Kingdom and Ireland. This is certainly a point for the agenda. It is not up to the scientific council to decide this, but we want to raise the issue.’

‘The new Covid variant is nearly a new epidemic within the epidemic.’

Consequently, EUR traders have become more concerned about the outlook of the Eurozone’s economy.

Also, a rising number of Covid-19 infections throughout Europe wracking confidence in the bloc’s recovery.

Euro (EUR) traders are awaiting today’s speech from Christine Lagarde, the European Central Bank’s (ECB) President.

Any downbeat comments about the outlook for the Eurozone’s economy would drag down the EUR/GBPE exchange rate.

GBP/EUR Outlook: Could Rising UK Retail Sales in December Boost Sterling?

Pound (GBP) investors will be looking ahead to tomorrow’s release of the latest UK BRC Like-For-Like Retail Sales data for December.

Any improvement in the UK’s retail sector could provide a boost for the GBP/EUR exchange rate.

Tomorrow will also see a speech from Dr Ben Broadbent, a member of the BoE’s Monetary Policy Committee.

If Broadbent is notably downbeat about the UK’s economic recovery going forward, we would see Sterling stuffer.

The GBP/EUR exchange rate could head higher this week, however, if the Europe’s Covid-19 situation shows any signs of worsening.

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