The Pound to Euro (GBP/EUR) exchange rate remained limp this morning as the third national lockdown continues to loom over Sterling.
The pairing is currently trading around 1.1057.
Pound (GBP) Struggles over Negative Sentiment
The Pound’s (GBP) worries continued this morning as England’s third national lockdown has legally come into force, with MPs set to vote retrospectively on it later.
The measures, which are expected to be enforced until at least the middle of February, are in line with Prime Minister Boris Johnson’s promise that ‘tens of millions’ will be vaccinated over the next three months, which will ultimately allow for the unlocking of the economy.
However, there are concerns that less than a million Oxford/AstraZeneca doses are available this week, with batches awaiting final approval.
The Financial Times quoted one senior government official who says the government had failed to vaccinate as many as it had hoped to by the end of the year.
The UK Services PMI was also revised down to 49.4 from 49.9 estimated earlier showing a contraction in growth, which did little to support the Sterling
Euro (EUR) Remains Positive despite Disappointing PMI
The Euro (EUR) regained positive traction this morning to move closer to weekly highs.
In spite of the Eurozone’s Composite PMI for December falling below forecasts to 49.1, of which the services PMI dragged figures lower, the Euro remained on the front-foot, as the US Dollar (USD) continues to struggle.
However, the figures have left EUR investors concerned for the future of the Eurozone’s economy, as Europe’s lockdowns continue to wreak havoc.
Chris Williamson, the Chief Business Economist at IHS Markit, was pessimistic about the figures, saying:
‘Worse may be yet to come before things get better, especially as the latest survey data were collected before the news of the new – more contagious – strain of the virus. Service sector activity in particular looks likely to remain constrained by severe social distancing in the early months of the new year. The risk of a technical recession, with GDP also falling in the first quarter has therefore risen.’
Pound to Euro (GBP/EUR) Exchange Rate Outlook: Pound Could be dragged down further over Vaccine Fears
Pound (GBP) traders will continue to monitor the UK’s coronavirus pandemic this week.
Any signs that the lockdown is not combatting rising Covid-19 cases, and a possible delay in vaccine rollouts would negatively affect Sterling.
Furthermore, a speech by Bank of England (BoE) Governor Andrew Bailey will be a focus for GBP investors today, which may weaken the Pound if he warns that the third national lockdown could lessen the BoE’s economic forecasts for 2021.
For Euro (EUR) traders, in the forefront today will be the publication of Germany’s consumer price index this afternoon. The Euro could face some pressure if inflation in the Eurozone’s largest economy continued to decline at –0.3% at the end of 2020.
Euro investors will also be monitoring their coronavirus situations, but also tomorrow’s release of November’s Eurozone Retail Sales data. If these disappoint like the composite PMI we could see the Euro suffer.