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Pound Euro Exchange Rate News: GBP/EUR Rises as Omicron Fears Ease

December 7, 2021 - Written by John Cameron

GBP/EUR Firms amid Easing Omicron Concerns

The Pound to Euro (GBP/EUR) exchange rate has risen slightly since the opening of today’s European session thanks to easing concerns over the Omicron Covid variant.

At the time of writing, the GBP/EUR exchange rate is trading at approximately €1.1764 with minimal market movement.

Pound (GBP) Strengthened by Easing of Omicron Fears

The Pound (GBP) began today’s session by trending upward against the Euro (EUR) as concerns surrounding the recently-identified coronavirus, Omicron, begin to ease.

This has come after scientists have suggested that Omicron may not be as critical as first thought, despite being more contagious.

Dr Anthony Fauci, lead infectious diseases expert in the US, said:

‘Thus far, it does not look like there’s a great degree of severity to it. But we have really got to be careful before we make any determinations that it is less severe or it really doesn’t cause any severe illness, comparable to Delta.’

As research surrounding Omicron continues to deliver cautiously positive information, the UK is opposing the need for additional lockdowns.

Ex-Prime Minister, Theresa May, said:

‘…variants will continue to appear year after year. We cannot respond to each new variants by stopping and starting our economy which leads to businesses and jobs being lost.’

Although Sajid, Javid, Secretary of State for Health and Social Care, is being cautious regarding the Omicron variant, GBP investors are gingerly optimistic that the UK will avoid further restrictions.

However, GBP gains are likely to be limited by dovish comments from Bank of England (BoE) policymakers which suggest that rates will remain unchanged following December’s policy meeting.

Euro (EUR) Subdued as Inflation Higher Than ECB Target

At the same time, the Euro (EUR) has slipped against the majority of its peers this morning as the European Central Bank (ECB) reassess their stimulus policies.

The surge of 4.9% inflation in November in the Eurozone exceeded the ECB’s target of 2% and was in response to the threat of Omicron’s severity. This has caused bottleneck supply issues and seen prices skyrocket.

An ECB governing council member said:

’On Omicron, it’s clear that it will keep inflation up for longer because the disruption of supply chains will last longer.

‘The pandemic has changed the structure of the economy, with more homeworking, a higher carbon price and a shift away from globalisation. Over the medium-term, inflation could be higher than our target and then we would have to act.’

The potential monetary policy tightening from the US Federal Reserve’s has further accelerated EUR losses as investors anticipate a quickening of the Fed’s tapering of its bond-buying programme and an early interest rate hike. This places downside pressure on the EUR due to the Euro and US Dollar’s negative correlation.

In addition, the German ZEW economic sentiment index has fallen to 29.9 in December, down from31.7 in November, but ahead of a forecast drop to 25.1.

GBP/EUR Exchange Rate Forecast: GBP and EUR to Fluctuate?

Looking ahead, the Pound Euro exchange rate may trade in a mixed range throughout the week due to a lull in notable data through the first half of the session.

Later in the week Sterling may be weakened by the UK’s latest GDP print. October’s release is forecast to report domestic growth slowed by 0.6% to 0.4% at the start of the fourth quarter.

On the other hand, Euro is likely to be influenced largely by ECB policymaker speeches and German data.

On Thursday, Germany’s will publish its latest trade figures. October’s balance of trade is forecast to increase to €18.4bn from €16.2bn.

Other influences for both GBP and EUR is likely to come from headlines regarding ongoing issues such as the impact of Omicron, supply chain issues and Brexit.

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