• Pound (GBP) edges lower after rallying 1.3% last week
  • CPI data later in the week could lift GBP
  • Euro (EUR) under pressure amid Pfizer vaccine distribution issues
  • ECB decision later in the week

The Pound Euro (GBP/EUR) exchange rate is moving modestly lower in early trade on Monday . The pair ralied+1.3% across the previous week closing on Friday at €1.1245, after hitting a fresh 2 month high of €1.1280. At 05:15 UTC, GBP/EUR trades -0.05% at €1.1235.

Optimism surrounding the UK covid vaccine helped to support the Pound across the previous week. The British government said that it hopes to start easing lock down restrictions on March as it presses ahead with Europe’s fastest rollout of Covid vaccines. The government aims to vaccinate the most vulnerable people by mid-February – around 15 million people.

The UK has the highest death toll in Europe and has been in national lockdown since January. This is the third national lockdown and will almost certainly push the UK into a double dip recession. The monthly GDP reading from November (the second lockdown) showed a contraction of -2.6% compared to the previous month.

Looking ahead across the week, the Pound could find some support from UK inflation data. December CPI is expected to show inflationary pressures rising. Should this be the case, investors will continue to push back on the idea of negative interest rates nd loser policy from the Bank of England, supporting sterling.

Meanwhile the Euro has been under pressure in recent sessions owing to the strong US Dollar. Furthermore, covid cases continue to rise on the old continent. Germany is due to take a decision this week as to whether to extend its lockdown restrictions, which started in November. Concerns over a delay in the Pfizer vaccine distribution in Europe has also revived concerns over the economic recovery.

Whilst today there is little on the Eurozone economic calendar, releases will pick up across the week with the European Central Bank rate decision and manufacturing and service sector PMI’s for the bloc also due.