EURGBP Continues on the Recovery Path

The EURGBP exchange rate was trading 0.17% higher in early trading on Monday as the UK lifts all virus restrictions. Cases in the country are rising fast and there are worries that the reopening could be reversed. There is no big-ticket economic data ahead this week for the euro versus the pound and virus headlines may rule the week for the pair.

The EUR to GBP is trying to find a bottom after testing lows near the 0.8500 level recently.

ECB launches digital euro project

The European Central Bank (ECB) has officially launched its digital euro project and will conduct a two-year investigation into key issues regarding the design, distribution and use of a central bank digital currency (CBDC).

The study will involve “focus groups, prototyping and conceptual work” and examine a possible design based on users’ needs, potential use cases for a digital euro, the changes to the European Union’s legislative framework a CBDC would require and the possible impact on the market and the overall economy”.

During the study phase the ECB’s “technical work on the digital euro with the European Commission will also be intensified,” the bank says.

The ECB first set out the case for a digital euro as “a riskless, accessible and efficient form” of CBDC back in October of 2020.

“Experiments were conducted in the four following areas: the digital euro ledger; privacy and anti-money laundering; limits on digital euro in circulation; end-user access while not connected to the internet and facilitating inclusiveness with appropriate devices. No major technical obstacles were identified to any of the assessed design options,” the ECB says.

Boris misses ‘freedom day’

After all of the hype surrounding Boris Johnson’s freedom day, the Prime Minister will actually miss it as he self-isolates at the chequers retreat. The PM’s health minister Sajid Javid contracted the virus and this has led to Johnson isolating, despite recovering from the virus in the past and also being fully vaccinated.

The news comes as the UK reports over 48,000 virus cases and some scientists have said that it is reckless to reopen the economy now.

In economic data, the European Central Bank will meet this week to announce its latest interest rate and monetary policy ideas. The bank has recently backpedalled on the 2% inflation rate and this will give the bank room to dodge any talk of early tapering.

“Two percent is not a ceiling,” Christine Lagarde, the president of the European Central Bank, said recently. The European reopening has also lagged that of the UK and the US, so they are not seeing the same pace of price pressures as the other economies. After finishing an 18-month review of its strategy, the bank’s Governing Council said it would no longer aim to keep inflation below, but close to, 2 percent. Instead, the bank would aim for 2 percent and be ready to accept “a transitory period in which inflation is moderately above target.”

The EURGBP exchange rate trades at 0.8585 with resistance ahead to the 0.8650 level.

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