Sterling rose to an eight-month high against a weakening euro on Wednesday as Britain's Covid vaccine rollout helped the pound, while the European Central Bank hinting at a possible rate cut hit the single currency.
Although Britain's death toll from the coronavirus pandemic passed 100,000 on Tuesday, its faster initial vaccine rollout than in the European Union has offered support to the pound.
The euro was under pressure after an ECB official said the central bank has room to cut its deposit rate further.
Sterling was up 0.3 pence at 88.26 pence at 3.30pm, after hitting its lowest point against the single market currency since May 13th.
Geoffrey Yu, senior EMEA market strategist at BNY Mellon, said “the general theme of UK doing well with vaccinations is playing a role” in lifting the pound, which is “not expensive and not over-owned yet”.
On the other hand, “the euro is clearly being undermined by ongoing concerns over vaccine rollout speed and supply,” Yu added.
Hope over reality
British prime minister Boris Johnson said on Wednesday the Covid-19 lockdown in England would end on March 8th, when schools could start to reopen.
As Britain left the bloc in December, the City of London said the capital's loss of some financial business due to Brexit has not been catastrophic and it will thrive even if the EU “irrationally” blocks access.
“For now Sterling continues to trade more on hope, vaccines, than current reality,” said Jeremy Stretch, head of G10 FX Strategy at CIBC Capital Markets.
