The difference in vaccine rollout within Europe is most likely to have a major impact on the respective economies.
Just as the UK moved to reopen certain non-essential businesses, Germany was headed in the opposite direction. The disconnect, aside from the political wrangling over vaccines, has had important effects on forex and their respective stock markets.
Despite the political controversy inside Germany over measures to deal with the virus, German businesses remain quite optimistic about the future.
For traders looking at the longer term, that might have further implications. The gap opening now in favor of the UK could potentially close once vaccine coverage through the continent is finally achieved.
That reversal of trade flows could be another opportunity, just as the current cycle has pushed the GBPEUR cross higher.
What the data says
Tomorrow sees the release of monthly UK GDP data from February.
Understandably, the UK was struggling in the middle of winter under the strictest lockdown yet. However, analysts broadly agree that January marked the low watermark for the UK this year. Projections for the February monthly GDP are of a 0.6% increase, compared to -2.9% in the prior month.
Under those circumstances, the March GDP would have to grow in excess of 2.4% for the UK to avoid a contraction in Q1. Still, having secured growth in the final quarter of the year, the UK is in a comfortable position to avoid a technical recession.
Unlike the continent.
Germany the best of the pack?
Later in the day, we get the ZEW survey of major German and EU businesses. This survey compares their current situation to where they think things will be in six months.
Most EU authorities agree that by the end of autumn, there would be enough vaccination to be hopeful of economic normalization. That’s within the timeframe of the ZEW survey. Therefore, this suggests that the survey reflects where businesses expect the economy to be when covid is finally behind us.
Expectations are for the German ZEW current situation to show a modest improvement, but remain extremely depressed. The consensus is for -52 compared to -61 prior.
This is likely to not really change anyone’s understanding of the economic situation in the Eurozone’s largest economy. So we wouldn’t expect much of a market reaction.
Where the difference lies
Expectations for ZEW Economic Sentiment, on the other hand, are for a move up to 79.5. This would be the highest on record once again, above last month’s 76.6 reading.
It appears that German businesses think that the worse things are now, the stronger the rebound will be.
This sentiment isn’t shared across Europe, though. Expectations are for the ZEW Economic Sentiment for the Eurozone to drop modestly to 73.2 compared to 74.0 in the prior reading. Although slightly lower, it’s still only a few decimals off the record high as well.
The consensus remains that Europe still has potential for a strong rebound, just that it has been delayed by half a year compared to other countries with more advanced vaccination programs such as the US and UK.