The EU is likely to recover the lost ground in the months ahead as more vaccines are distributed
Last November, the world found hope in the fight against the Covid-19 pandemic as three companies — Pfizer/BioNTech, Moderna, and AstraZeneca — announced potentially effective vaccines. Those announcements showed sufficient light at the end of the tunnel to send markets decisively higher.
However, nations are now in a race to reach herd immunity via vaccination, with the UK way ahead of mainland Europe in terms of curbing Covid-19.
Exchange Rates Reflect the Success of the Vaccination Campaigns
The United Kingdom started the vaccination campaign sooner than most by using its emergency procedures to authorize the new vaccines, whereas the rest of Europe has endured a vaccination fiasco during the first quarter of this year. Simply put, the European Commission ordered its vaccines too late compared with the United States and the United Kingdom.
The currency market has sold the EUR/GBP exchange rate since the start of the year, with the cross pair falling from 0.90 last December to less than 0.85 a week ago.
The EUR/USD pair also closely reflects the differences in the vaccination campaigns. It opened the year above 1.23, then fell to 1.17 by the end of March. However, the EUR/USD rose from 1.17 to 1.20 recently as the vaccination rate increased across Europe.
Yesterday, European Commission President Von der Leyen announced that the EU had hit the milestone of 100 million vaccinations, which — considering that a quarter of those were second doses — means that about 25 million Europeans have been fully vaccinated.
The road ahead remains bumpy. Delays in deliveries, and some skepticism about the AstraZeneca and Janssen vaccines, may mean that other regions of the world race ahead. Whatever happens will be reflected first in the currency markets.