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  • EUR/GBP dropped convincingly beneath the 0.8500 level for the first time since last February on Monday.
  • UK PM Boris Johnson announced that the UK will be moving to stage two of its roadmap out of lockdown.

EUR/GBP dropped convincingly beneath the 0.8500 level for the first time since last February on Monday, the pair having fallen in seven out of the last eight session now since it dropped back sharply from the mid-0.8600s on 25 March. Conviction in the move has not been especially high, given the absence of European market participants given the Easter Monday public holiday seen across most countries on the continent.

The pair is currently consolidating in the 0.8490s, having rebounded modestly from session lows in the 0.8470s. A slow and steady grind to the downside seems likely to continue for the foreseeable future amid the better near-term outlook of the UK’s economy versus the EU and amid a lack of any notable areas of support ahead of the February 2020 lows around the 0.8300 handle.

Driving the day

There hasn’t been a great deal to update on out of the EU on Monday; France went into its new four-week national lockdown over the weekend as expected. Italy also went into lockdown over the weekend in a bid to stop an Easter holiday’s related surge in infections, again as expected.

News out of the UK on Monday has been a little more interesting; UK PM Boris Johnson announced that the country will be moving ahead to stage of its reopening plan on 12 April, as hoped, meaning that most businesses (aside from indoor hospitality) will be permitted to reopen as long as safety and social distancing guidelines are followed. Moreover, the UK government announced that it will adopt a new traffic light system for international travel and will also make two free tests available to each member of the public every week.

FX investors seem to have taken the news well, with GBP one of the best performing G10 currencies on the day. Each time the UK crosses a new milestone on its road towards normalisation, even if it is expected, it highlights the differing fortunes of the EU and UK. The latter is in lockdown as it struggles to contain a third wave of infections and with its vaccine rollout. When infections rates will drop and lockdowns will be eased is highly uncertain. Conversely, the UK, with its highly efficient vaccine rollout, looks to be on a one-way trip towards (relative) normality and freedom, with even the main scientific advisors now talking about how there will be no more lockdowns in the UK.