Pound to Euro Sees Early Dip as UK Virus Worsens

The pound to euro exchange rate saw an early dip of around 0.20% as the UK grappled with the latest strain of the coronavirus. Another 1,035 deaths were reported in the country, taking the total to more than 80,000 fatalities ‘within 28 days of a positive COVID test’.

The pound and euro outlook will determined by the virus spread as there is little data coming until the UK Gross Domestic Product (GDP) growth figure on Friday.

UK Virus Spread Weighs on Pound

The UK is still struggling to contain positive cases of the coronavirus with another 54,000 seen on Sunday. In Europe, we saw 15,000 in France and 18,000 new cases in Italy.

The figures were the fourth day in a row that the UK had reported more than 1,000 daily deaths and there is little respite for sterling after the recent lockdowns ended any hopes of gains in the currency after the Brexit deal was signed. Prime Minister Boris Johnson urged Britons that their compliance was “more vital than ever”.

The UK’s hopes of escaping the virus are pinned on the vaccine and this week will see seven mass vaccination centres opening up in England, offering jabs to those 80 years old and over. Health Minister Matt Hancock is due to set out the Government’s new plan for delivering further vaccines.

As the vaccination plan moved down the age groups, it may be the second quarter before any opening up of the economy can happen.

EU Minutes and UK GDP Figures will be Focus

The pound to euro rate will be driven in large part by the economic data from Thursday as the European Monetary Policy meeting minutes are released, followed by UK GDP the following day.

The minutes may give some insight into the next path of the European Central Bank (ECB) in 2021. The European economy is nowhere near the bank’s goal of 2% inflation with EU inflation at 0.2% and German numbers at -0.3%. Further stimulus packages will be likely due to the current lockdowns but the bank will need to take other measures to lower the Euro because the stimulus is not spurring any inflation in the Eurozone.

UK GDP figures for November will give some insight to the country’s path, but the focus is on the current strict lockdowns that were enforced in November and increased at Christmas. Any positive reading in the growth numbers for the UK would be taken in context of the economic shutdowns.

The GBPEUR rate was trading at 1.1070 on Monday and the pair may seek to test the support at 1.1000.

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