EURGBP Fails to Get Support from the ECB

The EURGBP exchange rate was flat on Friday morning as the single currency failed to get a boost from the European Central Bank meeting. The bank did talk of raising bond purchase levels as predicted, but markets have largely priced-in the outcomes of small yield rises. German inflation came in as expected to help that scenario and the UK saw a slightly better GDP to also stifle the euro.

EURGBP trades at 0.8560, just 20 pips away from the recent lows.

ECB Fail to Rescue Euro, Vaccine Halted

The European Central Bank kept their key interest rate at zero as expected and made the required statements to the market regarding recent bond selling.

The bank saw the recent yield spike as “undesirable” and committed to act if it reappeared. The comments had the desired effect as Spanish yields fell on the statement.

Another cause of concern yesterday was the news that Denmark had halted the use of AstraZeneca’s vaccine over blood clot fears. The company were recently at the centre of delivery arguments with the EU.

The news led to the vaccine being suspended in ten other countries in Europe, including Norway, Austria, Italy, Romania and Estonia. This could be another setback for the European economy if it is forced to slow its vaccine rollout further.

The OECD already saw the country lagging behind the UK in 2021 growth and it could have an impact on the euro to pound outlook if it deteriorates further.

The Danish action, which will include a two-week review, is expected to slow the country’s vaccine program. It is estimated that 25% of those who received a first dose in Denmark, were given the AstraZeneca jab.

UK GDP Lower but Beats Expectations

The UK saw January GDP coming in better that expected despite a -1.7% loss. The figures help to back up the recent predictions of a strong recovery when the economy finally reopens.

The services sector, which includes hospitality and retail, was again the drag on the figure but all sectors are below their pre-virus peak.

Next week will see the Bank of England making their own interest rate update, but there may not be much to move the exchange rate. The bank will probably signal a similar tone to the ECB and state a willingness to act if rates climb higher. It was only a couple of months back that the bank was on negative rate watch, so the situation has flipped from that stance.

EURGBP trades near the 0.8540 lows but the market seems happy to sit here as it awaits further news, and the vaccine situation could be a driver if the EU has to slow its rollout or adjust their allocations. Italy recently refused an export request from Australia for the AstraZeneca shot to use them domestically.

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