- Pound (GBP) rises after slumping last week on covid news
- UK mortgage approvals due
- Euro (EUR) slips after strong gains on Friday
- German inflation data due
The Pound Euro (GBP/EUR) exchange rate is heading higher at the start of the week, paring some losses from the previous week. The pair lost over 1.1% last week, settling on Friday at €1.1780 towards the weekly low. At 05:45 UTC, GBP/EUR trades +0.37% at €1.1765.
The Pound dropped sharply lower on Friday amid the discovery of the new Omicron covid variant. The new strain of covid that was first discovered in South Africa is significantly different from the original Wuhan version raising questions over whether it could be resistance to the current covid vaccines. Whilst very little is actually known about the new variant right now, nations are taking few chances, with many bringing in new travel restrictions to the area.
The British Prime Minister Boris Johnson, over the weekend set out new restrictions for incoming travelers into the UK and also suggested that it was time to ramp up the booster jab programme.
The risk off session boosted demand for the safer haven the euro.
Looking ahead covid developments are expected to remain very much in focus particularly given the light UK economic calendar. Just UK mortgage approvals and money supply are expected.
The Euro surged higher on Friday on the new covid variant announcement. Part of those gains were owing to a tumbling US Dollar as investors questioned the fed’s ability to hike interest rates. The Euro trades inversely to the US dollar.
Looking ahead there is lots of data for investors to digest. Firstly, Eurozone consumer confidence is likely to be in focus. Analysts expect morale to tick lower in November amid rising process and surging covid cases. Several European countries re-imposed restrictions with Austria even imposing a full lockdown.
Also under the spotlight will be Germany’s inflation reading for November. Analysts are expecting inflation to continue rising to 5.4%, up from 4.6%. Supply chain bottlenecks and chip shortages have sent prices to the highest level in 30 years. There are few signs of it slowing yet.