The Pound Euro (GBP/EUR) exchange rate struck higher this week, as the single currency was laid low by growing concerns over Europe’s coronavirus resurgence.
Euro suffers as the Europe faces third wave of coronavirus cases
The Euro faced an uphill battle this week, as concerns that the Europe is facing a third wave of coronavirus cases, coupled with the EU’s sluggish vaccine rollout, undermined demand for the safe-haven currency.
EUR exchange rates rallied in mid-week trade following the release of some stronger-than-expected PMI figures, with the EUR investors particularly welcoming of the manufacturing index, as it revealed growth in the bloc’s industry sector struck a record high this month.
However the euro was placed back on the defensive by the end of the week, after EU leaders were unable to offer a clear solution to how the EU will solve its vaccine woes following the latest virtual summit.
Meanwhile, it was far from plain sailing for the pound this week, with Sterling sentiment facing pressure at the start of the week amidst fears Europe’s coronavirus resurgence could spread to the UK, as well as concerns that vaccine nationalism on the part of Europe could delay the UK’s rollout.
Also infusing some volatility into GBP exchange rates were some mixed UK data releases, While GBP investors welcomed some stronger-than-expected employment and PMI figures, a shock slowing of domestic inflation briefly propelled GBP/EUR to a two-week low.
The bulk of Sterling’s gains were then focused at the end of the session as GBP investors were relieved that EU leaders opted not to block vaccine exports.
Coronavirus headlines to remain in focus next week
Looking ahead to next week’s session its highly likely that movement in the pound euro exchange rate will continue to be determined by coronavirus developments.
The euro is likely to be particularly vulnerable to any negative headlines, with the single currency set to face additional losses if coronavirus cases continued to rise across Europe and if the EU’s vaccine rollout continues to disappoint.
Meanwhile GBP investors will be looking for any signs that Europe’s third wave has managed to reach the shores of the UK, with any notable rise in infections potentially spooking traders.
On the data front the most high-profile release of the week will be the Eurozone’s consumer price index, which could may dampen the appeal of the euro if inflation is reported to have begun to slow again last month.