• Pound (GBP) underpinned by reopening optimism
  • PM to set out map to easing lockdown restrictions
  • Euro (EUR) pressurized by weaker covid outlook
  • German IFO business sentiment index in focus

The Pound Euro (GBP/EUR) exchange rate is treading water on Monday, consolidating strong gains from last week. The pair rallied 1.2%  across the previous week, settling on Friday at €1.1562. At 05:15 UTC, GBP/EUR trades flat at €1.1560 as it hovers around a fresh 11 month high reached on Friday.

The Pound holds onto strong gains as all eyes turn towards Prime Minister Boris Johnson’s speech later today where he is due to set out the road map for heading out of lockdown.

The PM is expected to adopt a cautious approach, most likely lacking formal dates. However, the fact that the UK is starting to ease restrictions over the coming months is supportive of the Pound. This could make the UK one of the first major economies to recover from the pandemic, which is particularly significant given that the British economy was one of the worst hit from the pan demic.

The rapid vaccine rollout means that now 17.5 million first doses of the covid vaccine have been administered. The number of daily infections has dropped below 10,000.

Optimism surrounding the reopening of the UK economy helped overshadow dire retail sales numbers on Friday. UK sales declined -8.2% month on month in January. However, data also revealed that the service sector PMI was significantly stronger than expected, almost reaching expansion.

There is no major data to be released today. After Boris Johnson’s speech attention will likely turn to tomorrow’s UK unemployment data.

The Euro came under pressure in the previous week amid mixed macro data. The Eurozone PMI readings showed that the manufacturing sector performed better than expected. However, the contraction in the region’s service sector was greater than expected.

The Eurozone’s coronavirus outlook has been limiting demand for the common currency, as the vaccine rollout has been slow to gather pace. However, there are signs that this is starting to improve.

Today sees the release of German IFO business confidence data whilst Eurozone inflation data will be in focus tomorrow.