By Joice Alves

LONDON (Reuters) – Sterling strengthened on Monday against the euro which was knocked by a slump in German business sentiment in January, while Britain’s COVID-19 vaccine rollout over the weekend offered support to the British currency.

Sterling had fallen in the previous session as a set of figures showed Britain’s third national lockdown prompted the sharpest drop in business activity since May, while retail sales remained weak in December.

But against a weakening euro, sterling edged 0.3% higher to 88.75 pence at 1600 GMT, not far from an 8-month high of 88.30 pence hit last week, after an Ifo economic institute survey showed German business morale slumped to a six-month low in January.

“The euro is under a bit of downward pressure after the weaker than expected Ifo,” said Adrian Schmidt, head of FX strategy at Continuum Economics, adding that in the longer run, “the relative weakness of Europe seems likely to drag GBP lower”.

Britain’s vaccine rollout gathered pace on Saturday, as the number of people with their first dose reached 5.9 million.

“Investors may start to sense we are turning the corner,” said Neil Jones, head of FX sales at Mizuho Bank.

Data showed on Monday that the number of shoppers heading out to retail destinations across Britain rose by 9% last week from the previous week, indicating signs of “lockdown fatigue” as the COVID-19 death toll rose to 97,939 on Jan. 24.

Versus the greenback, after hitting a 32-month high last week, sterling was volatile on Monday. It returned to gains, as investors prefered risk assets on hopes for more stimulus in the United States, but then lost some ground.

The pound was last 0.2% lower at $1.3657 against the safe-haven dollar, after hitting $1.3724 in morning trade, recovering from a slide to $1.3636 the previous session.

Graphic: Sterling Jan 25, https://fingfx.thomsonreuters.com/gfx/mkt/azgvolzmopd/Sterling%20Jan%2025.png

(Editing by Kirsten Donovan; Nick Macfie and Andrew Heavens)

MOSCOW (Reuters) – Russian President Vladimir Putin will address the World Economic Forum (WEF) by video conference on Wednesday, Russian news agencies cited his spokesman Dmitry Peskov as saying on Monday.

The event, which gathers business chiefs, political thinkers and state leaders, is being held online due to COVID-19.

Putin’s appearance is likely to be contentious with critics at a time when the West is weighing possible new sanctions against Russia over its treatment of Kremlin critic Alexei Navalny.

“I confirm Davos on the 27th,” the RIA news agency quoted Peskov as saying, a reference to the Swiss ski resort which has hosted WEF events in previous years.

Putin did not feature on the pre-conference agenda.

The Interfax news agency said Putin had not taken part in a similar event since 2009 when he was Russian prime minister.

(Reporting by Vladimir Soldatkin/Alexander Marrow; Editing by Tom Balmforth/Andrew Osborn)

FRANKFURT (Reuters) – The European Central Bank is setting up a small team dedicated to climate change to spearhead its efforts to help the transition to a greener economy in the euro zone, ECB President Christine Lagarde said on Monday.

Lagarde has made the environment a priority since taking the helm at the ECB, taking a number of steps to include climate considerations in the central bank’s work as the euro zone’s banking watchdog and main financial institution.

She is now creating a team of around 10 ECB employees, reporting directly to her, to set the central bank’s agenda on climate-related topics.

“The climate change centre provides the structure we need to tackle the issue with the urgency and determination that it deserves,” Lagarde said in a speech.

She said that climate change belonged in the ECB’s remit as it could affect inflation and obstruct the flow of credit to the economy.

The ECB said earlier on Monday it would invest some of its own funds, which total 20.8 billion euros ($25.3 billion) and include capital paid in by euro zone countries, reserves and provisions, in a green bond fund run by the Bank for International Settlement.

More significantly, ECB policymakers are also debating what role climate considerations should play in the institution’s multi-trillion euro bond-buying programme.

So far the ECB has bought corporate bonds based on their outstanding amounts but Lagarde has said the bank might have to consider a more active approach to correct the market’s failure to price in climate risk.

“Our strategy review enables us to consider more deeply how we can continue to protect our mandate in the face of (climate) risks and, at the same time, strengthen the resilience of monetary policy and our balance sheet,” Lagarde said.

(Reporting by Balazs Koranyi; Editing by Francesco Canepa and Emelia Sithole-Matarise)