Last week was positive for the pound, reaching mid 1.14 in the later part of the week. Driving this was the announcement from the Bank of England, confirming the unanimous vote to maintain the interest rate of 0.1%. Purchasing Manager’s Index (PMI) figures for the UK last week confirmed that growth in the service sector halted but there continues to be a positive outlook for business growth moving forwards. The UK retail sales report is due this upcoming week.
The UK Coronavirus infection rate also showed a 30% decline from previous weeks, indicating that the national lockdown and Vaccination roll out appears to be slowing the spread of the virus. As of yesterday, more than 12 million doses have been administered in the UK alone. Plans are also being put in place to have all over 50s vaccinated by May. Prime Minister Boris Johnson will announce the road map out of lockdown restrictions on the 22nd February.
With the end of the stamp duty holiday and the furlough scheme approaching in the coming weeks, ministers are piling on the pressure to ease restrictions hoping to help curb the effect on the UKs economy. The Bank of England suggested last week that they expect to see a sharp positive bounce back from the previous dip in Gross Domestic Product (GDP) when lockdown restrictions begin to ease later in the year.
Last week was a slow week for the euro. EUR has been struggling against GBP and USD in the first part of this year. The main factor contributing to this is the slow roll out of the COVID vaccine within the EU. EU Leader Ursula Von Der Leyen has come under heavy criticism this week and has admitted for the first time that the European union has made mistakes. As of the 5th February, Germany had administered 3 million doses of the vaccine. She stated more focus should have been put on production and delivery of the vaccine rather than just development of a vaccine.
The EU has vaccinated around 3.5 per 100, compared to the UK statistic of 16.5 per 100. Tensions have been rising recently between the EU and the UK. Last week, the EU threatened to suspend article 16 in the Brexit deal citing ‘Economic, societal or environmental difficulties’ enabling them to control vaccines going across the border in Northern Ireland. This was due to The EU believing the UK had an unfair advantage on vaccine supplies.
President Joe Biden took part in his first official interview this week. Whilst being interview by Norah O’Donnell many important topics were discussed such as stimulus checks, minimum wage and Donald trumps upcoming Impeachment trial.
Biden confirmed that he will be delivering his promise to deliver $1400 stimulus cheques without compromise. When asked who will be in receipt of the cheques he stated he is prepared to negotiate who will be eligible for assistance.
When discussing raising minimum wage in America Biden stated he cannot negotiate on this because of rules in the Senate. Therefore he doubts it will be in his ‘Rescue America plan’. He will instead look to make sperate negotiations in order to raise this to $15 per hour. He believes once this comes into place the whole economy will improve.
Donald Trump's impeachment was briefly discussed. He was asked if he were still a senator would he convict Trump, in which President Biden said he will leave the decision to the senate. Naming Trump an existential threat he expressed concerns that Trump is still receiving intelligence Briefings and clearly suggested that they will stop as he is not a safe person to receive secret information from the intelligence service. It is normally a tradition that exiting Presidents continue to receive security briefings.
The US are well underway with their Coronavirus vaccine rollout. Despite infection numbers still being in the region of 120,000 new confirmed cases per day and this is a substantial decline. The Country now are averaging around 12 per 100 of the population. President Biden has a 100-day plan in place and they are firmly on track to have 100 million of the US population vaccinated in this time period.
This week is also a quiet week for the US with data releases, however it will be interesting to see if the GBPUSD rate can break out of the recent high’s of 1.37 and touch 1.38 for the first time since March 2018.
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