23/03/2021

GBP falls on EU threat to block vaccines


GBP

Sterling fell against both the euro and dollar on Monday as investors sold the British currency following news the European Union could block AstraZeneca vaccine exports to the UK.

This follows supply issues in Europe and concerns among EU officials that it won’t reach its vaccination target. European Commission President Ursula von der Leyen stands ready to trigger article 122 of the EU treaty, which would allow the bloc to take exceptional measures such as seizing production of vaccines if severe difficulties arise in the supply of certain products to member states. Von der Leyen has stated “the EU want to see reciprocity and proportionality in exports and stand ready to use whatever tools we need to deliver on this” adding “this is about making sure Europe gets its fair share of vaccines”.

All eyes will be on Thursday’s EU summit where EU leaders are expected to make a decision. The outcome of the summit will likely cause some volatility in sterling which has already reaped the rewards of an extremely fast vaccination programme. Should the EU go ahead, this could derail the UK’s target to offer a vaccination to all adults by late July. Such a move will also ultimately impact how quickly the UK can completely remove lockdown restrictions, a delay in which will threaten the economic recovery and likely put pressure back on sterling.

This morning also saw the release of UK labour data which was a relatively mixed bag. UK unemployment beat expectations of 5.2% to read 5.0% but unemployment benefit claims and average earnings missed expectations. The extension of furlough has seemingly helped keep the unemployment rate under control, however, it must be noted a rise in unemployment is forecast for the end of the year as the scheme winds down.

EUR

Germany followed in France’s footsteps yesterday by extending its lockdown measures and imposing several new restrictions in an effort to curb a surge of infections driven by new Covid variants. Chancellor Angela Merkel spoke with the country’s 16 state governors before announcing that restrictions which were set to end on March 28 will remain in place until April 18.

Key announcements

07:00 – GBP – Unemployment rate (3m) (Jan) beat expectations to read 5%

07:00 – GBP – Average earnings including bonuses fell below expectations to read 4.8%

07:00 – GBP – Claimant Count change (Feb) – increased to 86.6k from -20.8k previous

11:50 – GBP – Governor Bailey Speaks

16:00 – USD – Fed Chair Jerome Powell speak


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