• Pound (GBP) supported by BoE Bailey’s comment
  • BoE rate decision on Thursday eyed
  • Euro (EUR) under pressure amid rising covid cases
  • German ZEW Sentiment data in focus

The Pound Euro (GBP/EUR) exchange rate is extending its move lower on Tuesday. The pair settled marginally lower -0.03% at €1.1654 on Monday after once again failing to convincingly attack €1.17. At 05:15 UTC, GBP/EUR trades -0.17% at €1.1624, towards the low of the day.

The Pound found some strength in the previous session after Bank of England Governor Andrew Bailey commented on the state of the economy. Speaking to BBC Radio 4 Andrew Bailey said that the impact of covid lockdown restrictions on the economy had been huge. However, he also pointed out that they were reducing. He confirmed that he expects the economy to return to its pre-pandemic size by around this end of this year and that inflation should pick up to 2% over the coming months.

This means that the BoE will have gone from almost implementing negative rates to considering hiking interest rates in a relatively short period of time. Expectations of a stronger UK economic recovery have stepped up thanks to a rapid covid vaccine rollout programme.

So far in the UK 24 million people have had their first covid vaccine.

Today and tomorrow the UK economic calendar is empty. Investors will be focusing on the BoE monetary policy decision on Thursday.

The Euro is showing resilience as a third wave of covid appeared to be growing on the old continent. France, Germany and now Italy as well are experiencing a resurgence in covid cases.

At the same time the region is failing to ramp up its vaccine programme. A growing number of EU countries have suspended the use of the AstraZeneca injection amid fears of blood clotting.

Today attention will be firmly on the German ZEW sentiment data. Analysts expect the current situation index to show an improvement from -67.2 in Feb to -62 in March. Meanwhile the economic sentiment index is expected to jump from 71.4 to 74. A strong reading could boost the Euro.