Pound exchange rate rises sharply against the Euro
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Jeremy Thomson-Cook was speaking after a 24-hour period during which the pound edged higher in comparison to the euro – and on course to push past its year-to-day high of €1.1714. Mr Thomson-Cook, Chief Economist at international business payments specialist Equals Money, predicted the euro would continue to lose ground against other currencies in advance of Thursday’s meeting of the European Central Bank (ECB).
He told Express.co.uk: “Sterling has pushed close to its highest level this year against the euro overnight.
“The pound has continued to benefit from strong news surrounding the speed and efficacy of the vaccine program in the UK, which shows the efforts on the continent to be far behind the curve.”
Mr Thomson-Cook added: “Similarly, whilst the noises from the Bank of England could be considered as cautiously optimistic on the UK’s recovery from the pandemic, investors believe that Thursday’s meeting of the European Central Bank will remain pessimistic on the strength of the continental economy.
We expect the pound to continue to beat up on the single currency into the ECB meeting on Thursday
“British businesses importing from the continent can buy euros at the best rate since the beginning of the pandemic; a vital boost given increased shipping costs as a result of Brexit and COVID-19.”
In an accompanying op-ed published on the EqualsMoney.com, Mr Thomson-Cook referred to a speech by Andrew Bailey, Governor of the Bank of England, in which he said there was “there is light at the end of the tunnel”.
Mr Thomson-Cook wrote: “Governor Bailey’s speech pushed back a little on the notion that the next move in rates from the Bank of England would definitively be higher but the market ended up focusing on comments that warned of concerns over rising inflation; music to a currency investor’s ears.
“We expect the pound to continue to beat up on the single currency into the ECB meeting on Thursday.”
He added: “Yesterday’s thoughts of a weaker euro have become reality with the single currency losing ground across the board ahead of Thursday’s European Central Bank meeting.
“We expect that to continue although markets may be concerned about being overly long the USD after its recovery of the past few weeks.”
With more than 22 million people having received the first dose of a COVID-19 vaccine in the UK, traders expect the swift inoculation programme to help the economy rebound from its biggest contraction in 300 years.
In his speech to the Resolution Foundation think tank, Mr Bailey painted a cautiously optimistic picture for Britain’s economy after the COVID pandemic and did not anticipate a big jump in inflation, which his chief economist and some investors see as a risk.
He explained: “There are reasons to believe that so-called long-term scarring damage to the economy will be lower than in past recessions.
“If I had to summarise the diagnosis, it’s positive but with large doses of cautionary realism.”
Jane Foley, Head of FX Strategy at Rabobank, said: “The comments that BoE Governor Bailey made yesterday have made the newspaper headlines this morning and are therefore probably having an extended impact on the pound.”
In early London trading, the pound hit a two-week high vs the single currency at 85.57 pence.
Sterling has gained more than four percent versus the euro in 2021.
In a note to clients, Chris Turner, Global Head of Markets at ING wrote in note to clients: “GBP continues pushing higher versus euro, with the clear divergence in the pace of vaccination and the central bank’s outlooks benefiting GBP.”
After suffering Europe’s highest COVID death toll, schools in England reopened this week in accordance with the UK’s lockdown-easing plan.
Also supporting the pound, Chancellor Rishi Sunak’s decision last week to extend his jobs support programme until the end of September in a budget that included measures to support economic growth through investments in infrastructure, skills and innovation.
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