EUR/GBP trading with positive bias in the 0.8650s as sterling’s struggles continue

• EUR/GBP continues to trade with a positive bias just below one-month highs in the 0.8650s.
• GBP underperformance comes despite reports that the UK is set to pass the Covid-19 herd immunity threshold by next Monday.

EUR/GBP continues to trade with a positive bias just below one-month highs in the 0.8650s, having rebounded from earlier session lows in the 0.8620s. The pair currently trades with gains of around 10 pips or about 0.1% on the day and continues to swing either side of its 50-day moving average at 0.8643.

Driving the day

Though not the worst-performing G10 currency on the day (that crown goes to USD, with CAD coming in a close second from bottom), GBP is not having a great session. This underperformance comes despite reports in the UK press that the country is set to pass the Covid-19 herd immunity threshold by next Monday, as well as strong UK data in the form of much higher-than-expected Construction PMI reading for the month of March (which came in at 61.7 versus forecasts for 54.6) and a much higher than expected RICS Housing Survey index figure (which came in at 59.0 versus forecasts for 55.0).

In terms of the euro, though the single currency is outperforming sterling, it is otherwise not having a particularly great session and is lower versus the likes of NZD, JPY, CHF and AUD. Euro traders have had to content with a hefty dose of ECB commentary as well as the release of the minutes of the ECB’s March meeting; as expected, the tone of the minutes was very dovish, with ECB members agreeing that it is important to provide assurance that the governing council will be maintaining highly accommodative monetary policy conditions for as long as necessary and sees no risk of overheating.

Meanwhile, ECB President Christine Lagarde noted that the pandemic and related containment measures will continue to have a negative impact on economic activity in the Eurozone in the short term, but that activity should pick up later in the year. ECB Chief Economist Philip Lane reiterated that favourable financial conditions must be maintained, ECB’s Klass Knot noted that he hopes the pace of asset purchases under the PEPP can be reduced by June.

In other Eurozone relevant news, French PM Castex noted that more than 10M people have now received their first Covid-19 vaccine, one week ahead of schedule. Further goods news with regards to the bloc’s up until now sluggish vaccine rollout may provide euro with a boost.