Sterling takes a hit as euro zone countries suspend AstraZeneca vaccine

By Joice Alves

LONDON, March 16 (Reuters) - Sterling fell against both the euro and the dollar on Tuesday as Germany, Italy and France suspended AstraZeneca's AZN.L COVID-19 shots amid safety fears, dampening euphoria in Britain over its swift vaccination push.

Sterling fell 0.6% versus the dollar to a one-week low of $1.3817 at 0935 GMT GBP=D3. Against the euro, it was 0.6% lower at 86.40 pence, touching its lowest level since March 5. EURGBP

The euro zone countries said they would suspend the AstraZeneca shots after several other European countries reported possible serious side-effects, but the World Health Organization said there was no proven link and people should not panic. nL1N2LD0O2

The United Kingdom said it had no concerns, but analysts have been cautious saying that if the safety fears surrounding AstraZeneca vaccine are confirmed, this could compromise Britain's speedy inoculation programme.

"Should the EMA (European Medicines Agency) rule that AstraZeneca does indeed have material safety concerns, this would potentially compromise the UK vaccine strategy, even if the EMA no longer have any standing in the UK post Brexit," said Jeremy Stretch, head of G10 FX Strategy at CIBC Capital Markets.

Such an outcome would risk sterling falling to around $1.3798, Stretch said.

Sterling has gained more than 4% against the euro in the past three months and more than 2% versus the dollar amid hopes for a relatively fast economic recovery following a speedy vaccination programme and declining numbers of COVID-19 cases in Britain.

Also weighing on the pound, the European Union launched on Monday legal action against unilateral British changes to Northern Irish trading arrangements. nL1N2LD0MW

In an interview with Italian daily Il Sole 24 Ore, the governor of the Bank of England Andrew Bailey said economic growth in Britain will fall by 4% in the first quarter from the same period last year and by 19% compared to the first three months of 2019. nR1N2KO028

(Reporting by Joice Alves; editing by Emelia Sithole-Matarise)

((Joice.Alves@thomsonreuters.com))