EUR/USD stuck within recent ranges ahead of key events later in the week

• EUR/USD has been choppy on Monday but continues to trade within last week’s 0.8550-0.8600 ranges.
• Eyes will be on this week’s BoE rate decision and comments from ECB officials, all taking place on Thursday.

EUR/GBP slipped to lows underneath 0.8560 early in the European morning session but has now pared back to the 0.8580s. With the pair having recovered well off of lows, bulls will be eyeing a test of last week’s high just under 0.8600. At present, the pair trades modestly higher by about 0.1% or just over 10 pips, but remains stuck well within last week’s 0.8550-0.8600ish ranges.

EU/UK News Update

Though the price action has been fairly subdued, and EUR/GBP continues to trade well within recent ranges, there are a few stories of note out of the Eurozone and UK that relate to current themes that have been driving the pair. Starting with the UK; the UK press was reporting over the weekend about how it looks as though the UK is going to be able to offer every adult in the country their first vaccine by 10 June, earlier than the government’s current end of July target.

Meanwhile, the same research firm that estimated the above-quoted forecast of all UK adults being offered their first jab is estimating that all adults in the Eurozone will be offered their first jabs by the end of August, nearly two months later (though this is significantly earlier than prior estimates). The UK thus retains its comparatively advantageous position regarding its vaccine rollout and scope for economic reopening over the summer.

Separately, BoE Governor Andrew Bailey was unexpectedly on the wires this morning (it is unusual for the Governor to speak so close to a rate decision) and he sounded pretty upbeat on the prospects for the UK economy, whilst downplaying fears that inflation might pick up to well beyond the bank’s 2% target. Bailey has thus set an upbeat tone ahead of this week’s BoE rate decision, which will now be expected to reflect a more upbeat outlook and could well be GBP supportive.

Finally, there are a few stories worth noting regarding sour EU/UK relations; the UK press was reporting over the weekend that the EU and UK are at “loggerheads” over post-Brexit fishing rights (nothing new there) and the EU has now officially launched legal action over alterations the UK government made to its trading arrangements with Northern Ireland. Bickering between the two sides is likely not to garner too much financial market attention unless the threat of tariffs/some kind of trade war is brought onto the table, in which case GBP is likely to be the worst hit given the smaller size of the UK economy versus the Eurozone.  

Turning to Eurozone news; pandemic news there continue to be much worse than in the UK. German ICU doctors are reportedly calling on the government to take the country back into partial lockdown as hospitalisations continue to grow. Meanwhile, concerns about the AstraZeneca vaccine being linked to blood clots remains and a number of Eurozone nations have now paused their rollout of the vaccine. Italian authorities have reportedly seized all the doses of a recent batch of AstraZeneca vaccine deliveries after an individual died after taking the vaccine and news recently broke out of Germany that the country will immediately stop administering the vaccine.

Separately, ECB weekly asset purchase data was just released and showed that, net-net, the bank’s asset purchases rose modestly to EUR 14B last week from under EUR 12B the week before. As a reminder, the ECB signalled last week that the pace of purchases would increase drastically over the coming quarter, with sources later suggesting this could mean the monthly rate of purchases could jump from February’s EUR 60B to as much as EUR 100B. In that case, Monday’s purchase numbers are disappointingly low, though ECB President Christine Lagarde did warn at last week’s press conference that they would be low given unusually high redemptions. Focus this turns to next week’s data. Markets will hope for net purchases of at least EUR 20B.

Looking at the rest of the week; euro traders will eye comments from a number of key ECB officials on Thursday, while the main event for GBP traders will be Thursday’s BoE rate decision.