GBP/EUR Exchange Rate Rises on Hopes for UK Economic Recovery
The Pound to Euro (GBP/EUR) exchange rate rose by 0.5% today, with the pairing currently fluctuating around €1.126.
Sterling rose today following news that a Covid-19 vaccine developed in the UK could prevent 70.4% of people from getting the coronavirus, according to Oxford University and AstraZeneca.
Sarah Gilbert, a professor of vaccinology at the University of Oxford, commented:
‘The announcement today takes us another step closer to the time when we can use vaccines to bring an end to the devastation caused by [Covid-19].’
Andrew Pollard, the chief investigator of the Oxford Vaccine Trial, explains:
‘These findings show that we have an effective vaccine that will save many lives. Excitingly, we’ve found that one of our dosing regimens may be around 90% effective and if this dosing regime is used, more people could be vaccinated with planned vaccine supply.’
Consequently, UK markets have cheered the news, seeing it as a possibility to recover the British economy in the months ahead, should the vaccine be fully successful in its rollout.
In Eurozone economic data, today saw the release of the latest flash Markit Services PMI for November.
The figure contracted as expected, but beat forecasts nonetheless, with the figure sinking from 51.4 to 45.8.
Duncan Brock, the group director at CIPS, commented on the data:
‘News of potential vaccines bringing a return to normality lifted the mood with a big rise in optimism to its highest since March 2015. But in the meantime, with service businesses still shedding jobs at a head-spinning rate, the New Year will be difficult as another recession waits on the doorstep.’
Euro (EUR) Sinks as Eurozone’s Economy Plunges into Decline in November
The Euro (EUR) failed to claw back against Sterling this morning following the release of the Eurozone’s flash PMI Composite data for November.
The data revealed that the Eurozone’s economy had fallen into contraction territory at 45.1 in November.
As a result, the outlook for the bloc’s economy has deteriorated, with Chris Williamson, the chief business economist at IHS Markit, commenting:
‘The eurozone economy has plunged back into a severe decline in November amid renewed efforts to quash the rising tide of COVID-19 infections. The data add to the likelihood that the euro area will see GDP contract again in the fourth quarter.’
However, the safe-haven Euro has also suffered from an improvement in risk-sentiment this week on further positive vaccine news.
Consequently, demand for the safe-haven single currency has suffered as investors begin to seek out riskier assets.
GBP/EUR Forecast: Could a Dovish BoE Drag Down Sterling This Week?
Euro traders will be awaiting tomorrow’s publication of Germany’s GDP figure for the third quarter.
Any signs that the German economy – the largest in the Eurozone – is under severe strain from Covid-19 lockdowns this month would be EUR-negative.
However, demand for the safe-haven Euro could remain subdued this week if news of a Covid-19 vaccine reveals an increased likelihood of its rollout either this or next year.
Pound investors will be awaiting tomorrow’s speech from the Bank of England’s (BoE) Monetary Policy Committee member Jonathan Haskel.
If Mr Haskel is notably downbeat about the outlook for Britain’s economy, then the GBP/EUR exchange rate would suffer.