- Pound (GBP) seen profit taking across the week
- Fundamental picture remains strong
- Euro (EUR) rises sharply on vaccine optimism
- Eurozone business activity rebounds in March, ECB minutes next
The Pound Euro (GBP/EUR) exchange rate is rebounding after two straight losing sessions . The pair settled -0.6% lower on Wednesday at €1.1569 and trades. At 05:15 UTC, GBP/EUR trades +0.2% at €1.1587. The pair is still down 1.4% so far this week.
The Pound continued to sell off on Wednesday and has been one of the worst performing G10 currencies so far this week without any clear fundamental driver for the selloff. In fact the news flow this week has so far been more good news than bad, which is aiding the rebound.
The UK is still on track to ease lockdown restrictions further on Monday with all shops, hairdressers and outside hospitability opening. Thanks to the strong vaccine programme and falling covid cases the IMF also upgraded the UK economic growth forecast to 5.3% this year.
The economic outlook for the UK is actually significantly stronger than that of its developed market peers which has made it the best performing G10 currency so far this year. With this in mind, the recent weakness is most likely a bout of profit taking rather than owing to a more sinister fundamental change.
There is no high impacting UK data due to be released today meaning that sentiment is likely to be the main driving force for sterling.
The Euro outperformed across the board in the previous session. Since the reports earlier in the week that Germany, France, Spain and Italy were ramping up their vaccination programmes with herd immunity expected by the end of June, the Euro has been in demand.
Yesterday stronger than forecast PMI data helped to cement solid demand for the common currency. Data revealed that Eurozone business activity bounced back to growth in March, boosted by a record expansion in manufacturing. The upbeat data comes despite Europe battling its third wave of covid and much of the region under lockdown restrictions.
Investors will look ahead to the release of the minutes from the latest ECB meeting. A very dovish stance from policy makers could drag on the Euro.