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GBP/EUR Forecast: Pound to Euro Exchange Rate Rangebound over Coronavirus Infection Rate Worries

March 10, 2021 - Written by John Cameron

The Pound to Euro exchange rate is rangebound today as fresh concerns over the UK’s lockdown easing spurs Pound investors to remain cautious.

At the time of writing the pair are currently trading at around 1.1643, as the Euro struggles to make any meaningful gains ahead of the European Central Bank’s (ECB) interest rate decision tomorrow.

Pound Sterling (GBP) Exchange Rate Rangebound as UK School Return Brings Fresh Covid-19 Fears

The Pound found itself heading lower today as Prime Minister Boris Johnson warned MP’s that the reopening of schools could drive coronavirus infection rates higher, affecting the timeline of the UK’s proposed route out of lockdown.

It comes as Professor Chris Whitty yesterday sought to warn MP’s that a surge in cases over summer would be inevitable if the UK population leaves lockdown measures too quickly.

The number of people being treated for Covid-19 in hospitals in the UK has fallen to around 10,000, however the comments from the Prime Minister caused concern.

Speaking today he said:

‘Of course, there will be a risk of increased transmission, that’s inevitable if you open up schools for millions of kids across the country. That is going to happen.’

Furthermore, the UK parliament’s spending watchdog reported that the £22bn spent on the ‘Test and Trace’ mobile app did nothing to cut infections of the coronavirus.

The report from the watchdog said:

‘There is still no clear evidence to judge NHST&T’s overall effectiveness. It is unclear whether its specific contribution to reducing infection levels, as opposed to the other measures introduced to tackle the pandemic, has justified its costs.’

Euro (EUR) Exchange Rate Struggles to Make Significant Gains

The Euro has struggled to make any significant gains this morning as US Treasury yields continue to rise, strengthening the US Dollar and capping any Euro gains.

More so, EUR investors aren’t making aggressive bets ahead of tomorrow’s ECB interest rate decision.

Supporting the Euro this morning, however, was France’s industrial production which beat forecasts and rose 3.3%.

Analysts at ING commented on the data, saying:

‘It seems that the French industrial sector has got off to a good start in 2021. Relatively little impacted by the restrictive measures put in place to fight the pandemic.’

‘This good performance of French industrial production could continue over the coming months. Indeed, the business climate and the PMI indices in industry improved in February, which should coincide with an increase in production that could continue in March and in the coming months.’

GBP/EUR Exchange Rate Forecast: European Central Bank (ECB) Interest Rate Decision in Focus

For Euro investors, the ECB’s interest rate decision will be in focus tomorrow. Although expected to remain at 0% to help combat the effects of the coronavirus pandemic across the Eurozone, any cautionary commentary from the ECB press conference over the bloc’s economic recovery would push EUR down.

Euro movement will also be driven by the strength of the US Dollar, if yields continue to rise then the single currency could suffer, although US inflation data for February appears to have eased concerns over the US economy overheating.

In absence of any data from the UK tomorrow, Pound investors will remain focused on any further coronavirus developments from the UK.

As cases continue to decline and the roadmap out of lockdown begins, investors will keep an eye on whether the recovery is a success.

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