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GBP/EUR Outlook: Pound to Euro Exchange Rate Dips amid Risk-off trade

February 26, 2021 - Written by John Cameron

In lieu of any notable data from both the UK and Eurozone today, the Pound to Euro exchange rate dipped this morning amid risk-off mood.

At the time of writing the pair are currently trading at around 1.4732.

Pound (GBP) Weakens as Risk-off Mood Increases

The Pound has weakened this morning as the recent rally regarding the UK Government’s exit plan out of lockdown appears to have run out of steam.

Pound investors readily await Bank of England (BoE) Haldane’s speech this afternoon, with hawkish commentary surrounding UK inflation and the recovery of the UK’s economy expected.

Furthermore, markets prepare for Chancellor Rishi Sunak’s spring budget next week, with Sunak expected to skip over pay rises for NHS staff.

Sara Gordon, head of health at Unison, who have been campaigning for a £2000 increase in pay for NHS staff commented on the decision, saying:

‘Money must be found to deliver it in the Budget on Wednesday. This can’t be allowed to drag on endlessly into the summer. The public expect NHS workers to be recognised and rewarded without delay for the risks they face in keeping the country safe.’

Euro (EUR) Makes Wider Gains as Market Risk Appetite Shifts

The main cause of movement in EUR today comes from the disappointing and delayed coronavirus vaccine rollout across the Eurozone and shift in market risk appetite.

Speaking at the EU Summit yesterday, the European Commission President Ursula von der Leyen promised to ‘accelerate the provision of vaccines’ as the EU lags behind in administering doses.

Von der Leyen also commented on the EU’s vaccine supply and whether to ban vaccines from leaving the EU, saying:

‘If companies don’t fulfil their contractual obligations, yet do export, the commission may decide to make a move under the export regime.’
Furthermore, many Europeans remain wary over the vaccine as a growing number of doses of the AstraZeneca vaccine are turned down by German citizens.

The head of Germany’s disease control agency, Lothar Wieler also stated that German’s need to ‘be vigilant in upholding social distancing.’

‘Alongside the positive developments, we are currently seeing a few clear signs of the trend turning,’ he warned at a press conference yesterday.

GBP/EUR Exchange Rate Forecast: PMI’s in Focus

Pound investors will be looking towards Monday’s final manufacturing PMI for February from the UK. With a small growth forecast, Sterling could find itself supported at the start of next week.

Euro investors will also be looking towards the Eurozone’s own manufacturing PMI release, with a modest growth expected, the Eurozone could see this as an indication that economic recovery is beginning, and see EUR pushed higher.

The GBP/EUR exchange rate will also be moved by any further coronavirus developments, with continuing vaccine problems in the Eurozone pushing the pairing further.

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