EUR/GBP bounces from multi-month lows back above 0.8850 post-ECB
|- EUR/GBP has seen minor upside in wake of the latest ECB monetary policy decision.
- The statement included a line about how the ECB might not need to use the full EUR 1.85T PEPP envelope.
- EUR/GBP has reversed around 30 pips from earlier lows when it hit 0.8830 for the first time since May 2020.
EUR/GBP has seen minor upside in wake of the latest ECB monetary policy decision, which in itself was not a particularly exciting event (there were no major policy changes following December’s EUR 500B PEPP expansion), but did include a line in the statement about how the ECB might not need to use the EUR 1.85T PEPP envelope in its entirety. Some saw this as a concession to the ECB’s more hawkish members, hence minor EUR upside seen in the aftermath that lifted EUR/GBP from below 0.8850 to current levels around the 0.8860 mark.
EUR/GBP has thus reversed about 30 pips from its earlier lows, when the pair dipped marginally below the 0.8830 level for the first time since May 2020. As of right now, EUR/GBP trades a little lower on the day.
Sterling performing well
GBP is performing well on Thursday, outperforming all but its antipodean counterparts. No obvious catalysts seems behind the day’s move, so analysts and market commentators are unsurprisingly again pointing to the UK’s ongoing solid progress with regards to the vaccination of its population relative to its developed market peers (such as the US and EU). The assumption driving GBP gains here appears to be that faster vaccination will allow the UK economy to reopen comparatively more quickly, setting the stage for economic outperformance later in the year.
However, there are growing concerns that the UK’s vaccination strategy might not be as effective as hoped; against the recommendation of Pfizer, the UK chose to widen the gap between first and second doses in order to vaccinate more people initially. Evidence from Israel, who looked at infection rates in the first 200K people to be immunized, suggests the first dose only prevents 33% of infections 14 to 21 days after being vaccinated. UK authorities are looking into this evidence currently. If the UK’s strategy does prove suboptimal, then this could set the stage for a reversal of recent GBP gains versus its peers.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.