The GBPEUR exchange rate was -0.04% lower on Thursday after the morning session and the recent uptrend is at risk from talk of the Indian virus variant in the country. Boris Johnson has said that the vaccine is enough to fend off variants but the media and scientists prefer to focus on the fear aspect, so there is potential for further losses in sterling.
GBPEUR is trading at 1.1588 on Thursday as it threatens to lose the 1.1600 mark this week.
Government criticised over Indian virus
The pound to euro rate is slipping as attention turns to rising virus rates in the country regarding the Indian virus variant.
Labour has criticised the government’s failures of continuing to fine citizens for flying abroad, but allowing an open door policy for direct flights to arrive from India. Labour said the borders were “like a sieve”. When Health Minister Matt Hancock was challenged earlier this week about rising cases, he decided to blame those who had not taken a vaccine.
Mark Harper, chair of the Covid Recovery Group took the same path by saying that the “wider society’s fate can’t be sealed by the actions of a small group of people”.
It has been the government’s playbook to trample on a small group of citizens and blame them for the lockdown strategies, usually those that liked to spend their free time in bars and restaurants, yet the country has allowed passengers to fly into the country in their thousands from troubled “hot spots”.
The Prime Minister insists that the vaccine will stop the variant, while data next week will also show how transmissive the latest strain is, as it now spreads to over 40 countries.
Pound v Euro could remain quiet for the week
Yesterday’s inflation figures for the UK and Europe was the last headline data for the week and the pair could drift into the weekend.
Traders were relaxed about inflation because it came in near analyst expectations but the underlying strength in price is there to be seen. Eurostat said that consumer prices in Europe had jumped to 0.6% on the monthly level for a 1.6% year-on-year increase. In the UK it was a 9.9% yearly increase in input prices that shows a steep underlying trend.
The Bank of England governor Andrew Bailey insisted that the trend was temporary, in statements to the Economic Affairs Committee. Ernst & Young said that inflation will hit 2.7% in late 2021 or early 2022. “Further rises in consumer price inflation are highly likely,” EY said.
The Bank is supposed to keep inflation at 2% but it has been lower than that target thought governor Bailey’s term. Estimates say there are £60 billion of “excess” cash reserves in UK bank accounts ready to be spent and this can add to the underlying pressure from rising oil and gas prices. The BoE expects inflation to be higher in the near-term before retreating again.
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