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Pound Euro Exchange Rate Dips as UK Covid-19 Fears Weigh on Sterling

August 19, 2021 - Written by John Cameron

GBP/EUR Exchange Rate Falls, Delta Variant Uncertainty Weakens UK Market Confidence

The Pound Euro (GBP/EUR) exchange rate dipped by 0.4% today as growing uncertainty over the Delta variant of the coronavirus weakens confidence in the UK’s economic recovery. The pairing is currently trading around €1.16.

Today saw reports that fully vaccinated adults can still harbour the coronavirus as high as those who are unvaccinated, particularly with the Delta variant of the virus.

Sarah Walker, a professor of medical statistics and epidemiology at the University of Oxford, explains:

‘We don’t yet know how much transmission can happen from people who get Covid-19 after being vaccinated – for example, they may have high levels of virus for shorter periods of time.

‘But the fact that they can have high levels of virus suggests that people who aren’t yet vaccinated may not be as protected from the Delta variant as we hoped.’

In absence of UK economic data today, Pound investors are instead monitoring the nation’s Covid-19 developments.

With daily cases of the virus increasing alongside hospitalisations, GBP traders have become increasingly worried about the autumn, when cases are expected to soar.

As a result, the Pound Euro exchange rate has fallen because of growing fears that lockdowns could be re-implemented to prevent the spread of the virus.

Euro (EUR) Exchange Rate Rises as Souring Risk Sentiment Boosts Safe-Haven Demand

The Euro (EUR) rose today as souring risk sentiment drives-up demand for the safe-haven single currency.

Following reports of rising cases of the Delta coronavirus variant in China and New Zealand this week, global market mood has deteriorated.

Yesterday also saw the release of the Eurozone’s inflation report for July, which confirmed estimates and rose by 2.2%.

However, the European Central Bank (ECB) is unlikely to tighten monetary policy.

Jack Allen-Reynolds, senior European economist at Capital Economics, explains:

‘Global supply problems have not pushed up goods prices dramatically, and ‘re-opening inflation’ has been limited so far.’

Bert Colijn, the senior economist for the Eurozone at ING, was also optimistic about the Eurozone’s job market, saying:

‘We are cautious about drawing longer term implications from this, because furlough schemes ending and additional slack outside of the labour force could well cause wage growth to remain modest in the recovery phase. But nevertheless we do like to note that the job market improvements so far add to some additional medium-term inflation risk.’

GBP/EUR Exchange Rate Forecast: Could Rising UK Retail Sales Boost the Pound?

Pound (GBP) investors will monitor tomorrow’s release of the latest retail sales for last month. Could rising retail sales buoy-up the GBP/EUR exchange rate as the outlook for the economy improves?

Tomorrow will also see August’s GfK Consumer Confidence gauge. Any signs of improvement could also boost Sterling.

Euro (EUR) investors will continue to monitor Europe’s coronavirus developments. If cases increase, then this would be EUR-negative.

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