The Euro has weakened this morning, triggered by European Central Bank comments expressing concerns about the strength of the common currency.
ECB policymaker Klaas Knot commented that the ECB were closely monitoring the exchange rates and have tools to counter further appreciation of the Euro if necessary, including potentially cutting interest rates. Economic growth is slow within the bloc and an overly strong Euro could potentially exacerbate this issue, further slowing the recovery.
This comes off the back of a sluggish start to the vaccine rollout in Europe, seeing only 2 in every 100 people vaccinated, compared to the UK's 10 in 100. The UK remain one of the fastest nations globally to roll out the vaccine, leading to Sterling's boost.
Analysts are viewing the speed of the rollout as a key driver for economic growth and currency performances in 2021. Optimists are hoping the UK's impressive vaccine rollout will make negative interest rates less likely, supporting the UK's economic rebound. However, the full impact of the third UK lockdown is yet to be understood and this could weigh on Sterling over the longer term. A sharp contraction in growth from this current lockdown might prompt the Bank of England to cut interest rates later in 2021.
As a result, the GBP/EUR has hit a fresh 8 month high after gaining 1-cent since yesterday’s low. The GBP/USD has gained around 1% since yesterday’s low and touched the highest levels since May 2018. The EUR/USD is down 0.5 cents and towards the bottom of its weekly range.
Eyes will now turn onto tonight's federal reserve interest meeting, alongside updated Covid-19 case numbers globally.
