The EURGBP exchange rate was trading 0.53% higher on Tuesday as a failure to breach the low levels by the pound, saw profit-taking. The British currency pushed back to its best levels in 2021, but it was unable to see a catalyst for further gains. The euro is bouncing despite Germany and France halting the use of the AstraZeneca vaccine, although it could be reinstated after Thursday.
EURGBP trades at 0.8622 ahead of some inflation and ZEW sentiment data releases.
UK Exports to EU Slumped in January
On Friday, the Office for National Statistics (ONS) said that British goods exports to the EU had slumped by a huge 40% in January. Although the figures were attributed to Brexit, it was a month of disruption, with the government’s theatrical negotiations going to the wire and leaving businesses unprepared. Queues at ports were also coinciding with French borders being closed due to the virus resurging and a more accurate reading will be seen in the next months.
The ONS said that “much of this is likely the result of temporary factors” and added that “trading began to recover towards the end of the month”.
The European Union also launched its legal action claiming that Boris Johnson has breached international law over his extension to goods checks in Northern Ireland. The formal notice was sent to Brexit minister David Frost, and will not be the type of “friendly relationship” he had called for recently.
EU Vaccine Issues Could Define EURGBP this Week, French Inflation Higher
The European Union’s vaccination program was in trouble again yesterday as Germany, France and Italy all halted the use of the AstraZeneca vaccine over safety fears. The vaccine was under critique over fears that it led to blood clots in some patients.
A decision by medical regulators is likely to be made on Thursday and could define the path for the euro v pound currency outlook.
Data released this morning has shown French inflation coming in higher than expected. Traders were expecting the number to cool to 0.4% but it came in at 0.6% level. The number is unchanged from last month but highlights that prices are still sticky in the Eurozone. The Italian number is expected to come in at 0.4% also, which would be a jump of 0.2%.
The European Central Bank have already upped their bond buying plans in the near-term, while the slow vaccine rollout may hamper any move to reopen the economy, but it still means that the central banks will have to deal with prices when economies reopen and savings get unleashed on the domestic economies.
The euro will look to build on this bounce and the next test will be the 0.5600 level which was the high for late-February.
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