In the final few days of 2020, the pound received a welcome boost against the euro, gaining by over 3% over the course of the last week. A run of positive news for the UK economy helped sterling Interbank exchange rates to reach over 1.126 yesterday, levels which hadn’t been seen since early September.
Markets have reacted positively to a trade deal having been agreed between the UK and EU in the final push of negotiations before 31st December, the UK’s official departure date from the UK.
Added to this, the Oxford-AstraZeneca COVID-19 vaccine has been approved for rollout in the UK which has helped lift spirits that the UK could start to bounce back from the effects from the Coronavirus pandemic. It was reported that Britain will have 530,000 doses of the vaccine ready to administer from today, hoping to supply ‘tens of millions’ of doses over the course of the next three months, Prime Minister Boris Johnson told the BBC on Sunday.
The UK housing market also showed continued signs of recovery, as house prices in the UK rose at the fastest pace in almost 6 years, climbing by 7.5% in 2020, according to Nationwide’s latest figures.
We have already seen the pound lose some ground against its currency counterparts as we begin this week, as stricter lockdown measures are expected to be announced in the coming days, according to PM Johnson. As cases of COVID-19 continue to rise, and a new highly contagious strain takes grip, the Government have already been forced to cancel the planned re-opening of schools across London and its surrounding areas this week. Teaching unions have called for further closures in addition to this.
Although much of England is already in tier 4, currently the highest level of restrictions, Boris Johnson advised that restrictions ‘alas, might be about to get tougher’. He continued to say ‘There are obviously a range of tougher measures that we would have to consider… I’m not going to speculate now about what they would be’. Labour leader Sir Keir Starmer strongly advised the Government on Sunday to put the country into a national lockdown within the next 24 hours.
The pound has weakened on the announcements of previous national lockdowns last year, so we could see further losses for sterling this week if this comes to fruition.
This morning Markit Manufacturing Purchasing Managers Index (PMI) figures will be released, and are expected to remain the same as the previous reading of 57.3. Services PMI will follow this on Wednesday morning, expected to remain the same as previous figures of 49.9. A PMI figure below 50 is seen as contraction, and therefore negative for the economy, therefore clients with an upcoming GBP currency transfer may wish to keep an eye on these releases.
However, the UK is not the only country currently facing tighter restrictions in a bid to slow the spread of the COVID-19 virus. France is the EU’s second worst affected country by COVID-19, following Italy, with over 64,700 deaths since the beginning of the Coronavirus pandemic. Several large New Year’s Eve parties were closed down including one attended by 2,500 people in Brittany, and concerns are mounting that Fridays confirmed case figure of 20,000 could soon soar following from these gatherings. Further curfews in Greece have also been implemented over the weekend as cases there have also increased rapidly.
This week key data which could create movement for euro exchange rates include Markit Manufacturing Purchasing Managers Index (PMI) this morning and Services PMI on Wednesday. If another solid month of expansion for the Manufacturing sector, EUR exchange rates could make gains against its currency pairings. However, if the Services sector maintains contraction (below 50) on Wednesday, euro gains could be limited. German unemployment and Retail Sales figures are also set to be released Tuesday morning. As Germany is seen as the powerhouse of Europe, these figures can have an impact on euro exchange rates and may be worth keeping in touch with your account manager here to keep up to date with recent and upcoming data releases this week.
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