Pound Strengthens on Covid-19 vaccine rollout optimism TORFX Weekly exchange rate news

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This week’s rates

Weekly Highs Weekly Lows

GBP/EUR €1.1254 €1.1039

GBP/USD $1.3695 $1.3457

EUR/GBP £0.9058 £0.8885

EUR/USD $1.2277 $1.2112

The Pound trended higher last week on rising hopes that the UK’s Covid-19 vaccine rollout programme could successfully meet the mid-February deadline.
 

Meanwhile, the Euro has struggled as coronavirus infections increase and lockdowns are extended throughout the Eurozone.

What drove exchange rates last week?

The Pound benefited from an intensifying Covid-19 vaccine rollout last week, with Prime Minister Boris Johnson announcing 24/7 vaccine administration centres as well as pharmacies providing vaccinations.

GBP investors are hopeful that the UK government’s target of 15^th February could be met, allowing greater economic activity in spring.
 

At the same time, UK markets were buoyed by hawkish comments from Bank of England (BoE) Governor Andrew Bailey, who doubted the efficacy of negative interest rates.
 

However, Sterling came under some pressure late in the week as, despite a better-than-expected -2.6% GDP figure for November, concerns increased over a UK double-dip recession.

This week also saw news that the German economy – the largest in the Eurozone – had shrunk by -5% in the final quarter of last year.
 

Combined with more news from Germany that it will extend its national lockdown into April, the Euro consequently fell further at the end of the week.
 

More EUR weakness followed the minutes from the European Central Bank’s (ECB) December policy meeting as they expressed concern over the strength of Euro exchange rates and the impact they are having on the inflation outlook.
 

Meanwhile, the US Dollar has fluctuated on heightened levels of US political uncertainty following the second impeachment of President Donald Trump, but recovered on Friday on Joe Biden’s plans for a $1.9 trillion stimulus package.

What could move exchange rates this week?

We could see the GBP/EUR exchange rate head higher this week if the UK Government’s Covid-19 vaccine rollout programme is seen to be on schedule to vaccinate those in vulnerable categories by mid-February.
 

EUR traders will be awaiting Tuesday’s publication of the latest German ZEW Survey of Economic Sentiment for January.
 

If this paints a bleak picture for the Eurozone’s economy going forward, we will likely see the single currency suffer.
 

This week will also see the European Central Bank (ECB) announce its interest rate decision.

If the ECB is notably downbeat in its monetary policy statement, and reaffirms its concerns over EUR exchange rates, we could see EUR move lower.
 

Flash Eurozone and UK PMI data will also be in focus at the end of next week, where any slowdowns in the data for either economies could drive additional movement.
 

The safe-haven US Dollar will remain sensitive to shifts in sentiment next week, while Joe Biden’s inauguration as president will be in focus as investors look for insight into policies he will likely prioritise.

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