- Pound (GBP) supported by vaccination drive
- UK service sector PMI to confirm deep contraction
- Euro (EUR) under pressure despite better than forecast Q4 GDP
- Eurozone inflation expected to rise 0.5% MoM in January
The Pound Euro (GBP/EUR) exchange rate is edging a few pips lower on Wednesday after two straight days of gains. The pair settled +0.16% on Tuesday at €1.1345 after reaching €1.1372 earlier in the session, a fresh almost 9 month high. At 05:15 UTC, GBP/EUR trades -0.05% at €1.1342.
The Pound has been supported by falling covid cases and a strong vaccine rollout programme. The number of new covid cases fell to 16,840 whilst the number of people who have received their first dose of the vaccine has jumped to just shy of 10 million.
Today attention will turn back to the UK economic calendar with the release of service sector PMI data. The final reading for January is expected to confirm the deep contraction of 38.8 that was recorded in the preliminary reading amid the fallout from the third national lockdown. The level 50 separates expansion from contraction. A weak reading could drag on the Pound.
This is the last data release ahead of the Bank of England meeting on Thursday. The central bank is not expected to adjust monetary policy. More recently the BoE’s governor has pushed back on the idea of negative interest rates which has boosted the Pound across recent weeks.
The Euro shrugged off fourth quarter GDP data which revealed that the Eurozone economy contracted by less than expected in the final three months of 2020. According to the European Statistics office Eurostat the Eurozone Q4 GDP fell by -0.7% quarter on quarter and contracted -5.1% year on year.
A slow vaccination programme in the Europe has dragged on demand for the Euro quiet considerably over the past few session. Whilst the UK and the US are ramping up vaccinations quickly, the Eurozone area has been slow off the mark.
Today on the Eurozone economic calendar CPI inflation is expected to grab the most attention. Consumer prices are expected to increase 0.5% month on month in January, rising from -0.3% decline in December.