- Pound (GBP) advanced after BoE’s Bailey talks down negative rates
- UK economy faces its darkest hour
- Euro (EUR) slips as Holland extends lockdown restrictions & Germany could too
- Eurozone industrial production & ECB C. Lagarde to speak
The Pound Euro (GBP/EUR) exchange rate is ticking modestly higher, extending gains for a fifth straight session.] . The pair settled +0.66% higher in the previous session at €1.1195, 15 pips down from the high of the day. At 05:15 UTC, GBP/EUR trades +0.05% at €1.1197.
The Pound surged higher in the previous session after Bank of England governor Andrew Bailey appeared to waver on negative rates. Mr Bailey warned that the UK was facing its darkest hour amid surging covid cases and tighter lockdown restrictions. Whilst he said that the end was in sight with the vaccine rollout, he also played down suggestions that negative interest rates would be a simple way to boost growth.
Mr Bailey went on to say that there were lots of issues with negative interest rates sending the Pound soaring versus its major peers.
His warnings over the health of the UK economy come following similar comments from UK Chancellor Rishi Sunak at the start of the week.
The UK economy is broadly expected to tip into a double dip recession, contracting the Q4 of 2020 and Q1 of the 2021. This comes after output tumbled -25% in the first two months of lockdown last year. Economic activity could well remain depressed until a covid vaccine is widely available.
The Euro slipped versus the Pound, although gained ground versus the US Dollar on Tuesday, despite lockdown restrictions across the region being tightened.
German Chancellor Angela Mekell said that lockdown restrictions are likely to last another 8 – 10 weeks amid fears that the UK covid strain will send already record infection numbers into uncontainable levels.
Her comments come after the Dutch Prime Minister also extended the national lockdown in the Netherlands into next month.
On the economic calendar German wholesale prices and Eurozone industrial production figures will be in focus. A speech by European Central Bank President Christine Lagarde will also be watched closely.