Sterling gets vaccine boost to hit 8-month high vs weakening euro

Sterling rose to an eight-month high against a weakening euro on Wednesday as Britain's COVID-19 vaccine rollout helped the pound, while the European Central Bank hinting at a possible rate cut hit the single currency.

Although Britain's death toll from the coronavirus pandemic passed 100,000 on Tuesday, its faster initial vaccine rollout than in the European Union has offered support to the pound.

The euro was under pressure after an ECB official said the central bank has room to cut its deposit rate further.

Sterling was up 0.3% at 88.26 pence at 1550 GMT, after hitting its lowest point against the single market currency since May 13.

Geoffrey Yu, senior EMEA market strategist at BNY Mellon, said "the general theme of UK doing well with vaccinations is playing a role" in lifting the pound, which is "not expensive and not over-owned yet".

On the other hand, "the euro is clearly being undermined by ongoing concerns over vaccine rollout speed and supply," Yu added.

British Prime Minister Boris Johnson said on Wednesday the COVID-19 lockdown in England would end on March 8, when schools could start to reopen.

Versus a stronger greenback, sterling reversed earlier gains and was down 0.3% to $1.3701, after touching a May 2018 high of $1.3759 in earlier trade.

Hopes for a large US fiscal stimulus package has fuelled risk sentiment in markets in recent weeks, benefiting sterling. Market participants are expecting Federal Reserve Chair Jerome Powell to renew a commitment to ultra-easy policy.

But closer to the US open risk sentiment turned sour and the safe-haven dollar rose as investors turned more cautious about COVID-19.

As Britain left the bloc in December, the City of London said the capital's loss of some financial business due to Brexit has not been catastrophic and it will thrive even if the European Union "irrationally" blocks access.

"For now Sterling continues to trade more on hope, vaccines, than current reality," said Jeremy Stretch, head of G10 FX Strategy at CIBC Capital Markets.