GBP/EUR hits €1.15 as UK vaccine success underpins economic optimism

The pound continued to rally on Tuesday, amidst growing hopes for a strong economic rebound in the UK this year.
 
Meanwhile, Sterling appears muted so far this morning, with GBP/EUR stable at €1.1506 and GBP/USD flat at $1.3887. GBP/CAD is rangebound at C$1.7652, while GBP/AUD and GBP/NZD are slipping slightly at AU$1.7893 and NZ$1.9325, respectively.
 
Looking ahead, the focus today is likely to be on the latest US retail sales figures, with an upbeat reading potentially driving the US dollar higher.
 

What’s been happening?

The pound maintained a positive trajectory through yesterday’s trading session, with the currency continuing to benefit from the UK’s success with its vaccination rollout.
 
This underpinned hopes that the UK will be able to start lifting lockdown measures before many other countries and will give it a head start with its economic recovery.
 
The euro, meanwhile, initially accelerated on Tuesday, with EUR investors cheering the publication of the Eurozone’s latest GDP estimate and German economic sentiment index, both of which printed above expectations.
 
However, these gains evaporated later in the session as the single currency’s negative correlation with the US dollar saw it sink as the latter rallied.
 
This pick up in the US dollar came on the back of a jump in US Treasury yields, which helped the ‘Greenback’ rebound from some initial weakness as an upbeat market mood and surging equity markets limited demand for the safe-haven currency through the first half of the European trading session.
 

What’s coming up?

Kicking off today’s session was the publication of the UK’s consumer price index, which could offer some support to the pound today after inflation printed above expectations in January.
 
Elsewhere the spotlight today will be on the latest US data releases, with the US dollar potentially finding additional support this afternoon if the latest US retail sales figures confirm expectations that sales growth rebounded in January.
 
However, any gains for the ‘Greenback’ could be quickly unwound if the publication of the minutes from the Federal Reserve’s most recent policy meeting reaffirm the Fed’s current dovish bias.
 
Meanwhile, in the absence of any notable Eurozone data, the euro could struggle to find support as the EU’s slow rollout of vaccinations continues to be a cause for concern for EUR investors.