The EUR to GBP exchange rate was trading lower by 0.20% on Wednesday as the pound sterling got a boost from comments by the Bank of England governor suggesting negative rates and stimulus were not imminent. The UK currency is also seeing a bid from its rollout of vaccine with almost 3 million people in the country already vaccinated.
Euro versus sterling was trading at 0.8915 in early trading with the key support at 0.8870.
BoE Suggests No Rush to Stimulus and Negative Rates
The Bank of England governor Andrew Bailey has said that the bank is in no rush to deliver further stimulus or negative interest. His comments to the Scottish Chambers of Commerce have given the pound support as the bank will meet in early February to discuss policy but traders can tick that one off the list.
The governor did warn that the UK economy was facing its “darkest hour” due to the latest virus outbreak. On negative rates he said there were “lots of issues” with cutting interest rates to negative and said that it could hurt banks.
“In simple economics and maths terms, there is nothing to stop it at all. However there are a lot of issues with it.”
The BoE are expected to hold their current stimulus total at £895bn as the bank sees no evidence of a further deterioration in the economy due to the furlough scheme.
Tomorrow sees meeting minutes from a recent ECB policy meeting and this could see Europe on a faster path to negative rates as it tries to shake off the deflationary tone in the economy.
UK Virus Path Could Also Boost Outlook
The ongoing efforts by the UK government to administer vaccine could also ease the outlook for the economy. The government opened seven mass testing centres this week in England and are set to deliver around 3 million vaccines by the next week or so. The government has plans to vaccinate 15 million by late-February and this could give the country an advantage over others in the race to reopen the economy.
German Chancellor Angela Merkel has been commenting on what she called the “British Virus” after the German economy was locked down until April.
The German newspaper Bild reported her as saying:
“If we do not manage to stop this British virus, then we will have 10-times the number of cases by Easter”.
Germany will see non-essential shops and services remaining closed, while schools and day care will also remain closed. The latest lockdowns are a blow to the European economy and there looks to be no way out of the chaos without a successful delivery of vaccines to the vulnerable age groups.
EURGBP is trading at 0.8900 and looks set to test the 0.8870 support level which was a stubborn support last year during the Brexit talks. Ge in touch to find out more about the outlook for the EUR to GBP exchange rate and how your upcoming currency exchange is likely to be impacted.