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GBP decline set to be short-lived

12 Apr 2021

On Monday, the Sterling-Euro exchange rate continued to face losses, but traders suggested that the decline should soon stop. The pair is being traded at 1.1516, having seen its largest weekly drop last week since September. The Sterling could be supported if the decline stops and prevailing rates at 1.15 attract more investment. Currently, the Pound Sterling is the worst performing major currency, with the U.S. Dollar closely following it. 

The vaccination rollout in the UK was a great boost to the economic outlook but concerns about the AstraZeneca vaccine is troubling the predictions. "GBP felt the perfect storm of the vaccination concerns and the heavy one-way positioning… However, on vaccinations, the UK regulator pointed out that the balance of benefits and risks still favours the AZ vaccine,” ING’s chief EMEA strategist for FX and bonds, Petr Krpata. “We expect sterling to recover fairly soon. With the EU Recovery Fund stuck in a German courtroom, the EUR re-rating story may have to wait."

On the other hand, the GBP/AUD rate is at 1.8000, whilst the GBP/USD rate trades at 1.3720. Experts keep suggesting that the decline that the Sterling is facing will be short-lived, “GBP declines should be short-lived, given the positive fundamental backdrop for the UK economy.” Another boost to the outlook is the March activity surveys, which highlighted an increase “in both consumer and investment driven activity into mid-year.” 

Moreover, the Euro-to-Dollar exchange rate is being traded at 1.1892 at the time of writing, allowing the Euro to overcome the 1.19 handle. This marked the strongest gain since the week ending November 23.