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GBP/EUR slumps as Boris Johnson warns Europe’s third wave will ‘wash up on our shores’

Philip McHugh March 23rd 2021 - 2 minute read

The pound retreated on Monday as GBP investors were unnerved by the prospect of Europe’s coronavirus resurgence impacting the UK.
 
Sterling is trading a little more robustly so far this morning, with GBP/EUR flat at €1.1616 and GBP/USD subdued at $1.3829. GBP/CAD is rangebound at C$1.7360, while GBP/AUD and GBP/NZD have rallied to AU$1.7988 and NZ$1.9575, respectively.
 
Looking ahead, some surprisingly upbeat employment figures could support GBP exchange rates through today’s trading session.
 

What’s been happening?

The pound found itself on the defensive at the start of this week, as the currency was undermined by comments from Boris Johnson, warning that the UK will feel the impact of the Eurozone’s coronavirus resurgence.
 
With the UK also facing an impending vaccine shortage, the news stoked fears the UK government may need to re-think its coronavirus roadmap.
 
The US dollar also faced a setback on Monday as a pullback in US Treasury yields somewhat dampened the appeal of the ‘Greenback’.
 
However, these losses were tempered by a prevailing risk-off mood at the start of the week, caused by concerns over the situation in Europe, as well as the sharp depreciation in the Turkish Lira following the shock sacking of the country’s central bank chief.
 
This dip in the US dollar allowed the euro to find some modest gains during yesterday’s European session thanks to the negative correlation in the pairing, although these gains were of course capped by concerns that Europe is facing a third wave of coronavirus infections.
 

What’s coming up?

Kicking off today’s session was the publication of the UK’s latest jobs report, with January’s release revealing a surprise drop in domestic unemployment.
 
Alongside the accompanying earnings figures, which revealed that wage growth accelerated over the same period, the pound could seek to mount a recovery today.
 
Meanwhile, EUR investors are likely to remain primarily focused on European coronavirus developments today, with the euro vulnerable to losses if the situation on the continent continues to deteriorate.
 
Across the pond, the spotlight today will be on the start of Federal Reserve Chair Jerome Powell’s two-day testimony in front of Congress, which may bolster the US dollar if Powell remains reluctant to tackle the issue of yields.

Written by
Philip McHugh

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