EUR/GBP hits fresh multi-month lows under 0.8700 level

EUR/GBP has come under selling pressure in recent trade, likely as a result of an increase in volumes ahead of and during the 4pm London Fix. The pair has managed to break below the 0.8700 level for the first time since May 2020, quite a reversal from earlier session highs of closer to the 0.8740 mark set prior to the start of US trade.

Driving the day

Ongoing optimism regarding the state of the UK’s vaccination efforts and prospects that the country will soon be able to ease lockdown continues to underpin GBP, hence why it sits near the top of the G10 performance table for a second consecutive day this Tuesday.

GBP outperformers the euro for this very same reason (and the fact that the EU’s vaccine rollout has been comparatively sluggish). But the euro is not a bad performer on the day. Indeed, though it is lower versus GBP, it is flat versus USD, NZD and AUD and stronger versus CHF, JPY and CAD.

A few positive factors might be supporting the euro on Tuesday (or, at least discouraging the bears from selling). First of all, data has been strong; the headline German ZEW Economic Sentiment index rose to 71.2 in February, well above expectations for a drop to 59.6 from 61.8. Elsewhere, ILO data released prior to the start of the European session showed the French unemployment rate dropping to 8.0% in Q4 from 9.0% the quarter prior, a massive beat on expectations for the unemployment rate to remain unchanged at 9.0%.

Meanwhile, the second estimate for Eurozone GDP growth in Q4 2020 came in a little stronger than expected, with the YoY growth rate revised up to -5.0% and the QoQ growth rate revised up to -0.6%. Elsewhere, Italy is receiving huge investor interest in its next round of debt issuance, a phenomenon market commentators are attributing to market optimism about the arrival of former ECB President Mario Draghi as the PM of the country.