Boris Johnson over the weekend could well of helped sterling to make even bigger gains this week by suggesting all UK adults will be offered the vaccine by the 31st July. There had been talk that it may take the best part of the year to see everyone get their first injection however it now appears the country will be vaccinated by the summer. This will mean the UK economy can continue on the path of recovery at some speed and considerably quicker than neighbouring countries.
Sterling had a big week against both the euro and US dollar with yearly highs being hit recently. The news from the Prime Minister could well help sterling continue on the charge against the euro to break 1.16 and strengethen to 1.40 level against the US dollar.
Boris Johnson will deliver his plan later this evening sharing exactly how the country will reopen. There are many clients waiting to see what impact this could have on the market, however it is always worth considering that the market factors in events before they happen. Plenty of information has been leaked in the last few days so it’s unlikely Johnsons speech will have a immediate jump, but with optimism brewing there could be some significant movements in the coming weeks.
There is always an opposite to consider, the Prime Minister and his scientists have come under pressure for potentially have a too conservative plan that wont see the country open up fully for some time. If the PM’s plan does involve several months before any major changes take place that could have the alternate effect on sterling. Make sure you’re in contact with your broker to discuss your best options or any target rates you may have.
Italy state broadcaster RAI over the weekend chose to publish the contract the EU have with AstraZeneca which essentially demonstrates that the EU had no grounds to actually sue the pharmaceutical company as it was already built into the contract that they couldn’t if there was a delay on delivery. The EU commission have declared that they intend to have 70% of the EU population vaccinated by the end of Summer which suggests it could be unlikely for everyone in the EU to be vaccinated by the end of 2021. Whilst Italy publishing the contract is not overly specific to currency, you do have to ask yourselves why they would do that and undermine the EU Commission in that way.
Anyone selling euros has so far this year seen the rate move nearly 5 cents higher on the interbank exchange when buying sterling. With many forecasters predicting that mid 1.15’s might be the rate when we got round to June, there is certainly now serious potential for the rate to keep rising. With the UK now kicking on aggressively with vaccinations the optimism for the pound is certainly there.
There are some significant events taking place in the EU this week with ECB President Christine Lagarde speaking today around lunchtime. Then tomorrow we will see the latest Consumer Price Index data which will indicate any changes to inflation this month, which there isn’t expected to be much change. Then finally we have business and consumer confidence on Thursday which will be a focus for many as if businesses around the Eurozone are sceptical of performance in the coming months that could well put further pressure on the euro. Keep in touch with your account manager fi you have a trade you’re looking to do.
US data took a turn on Friday with underwhelming data to end the week both from a jobs perspective as well as new houses. The US economy under President Biden is already a massive focal point and as the worst hit country from Covid-19 starts looks for optimism there is concerns that the recovery seen at the end of 2020 might be slowing down. There was however some positive news over the weekend that a survey of the boardrooms across America see their optimism for the future at a 17-year high, so corporate America sees the coming year as having huge potential.
One of the main challenges America will face is dealing with the large unemployment levels and the general cost of living potentially starting to spiral out of control. Biden is hoping that he can provide every person who needs it $1600 however many are asking what the knock-on effect of an action like that is. Providing the population with direct funding arguably only leads to inflation as companies know they can charge more money for goods. All these things have a chain reaction and arguably once the money is spent in a few months time much of the population could be in a worse position as prices are higher but wages are not.
Biden’s first major test is dealing with the power crisis in Texas which has so far seen 70 people die from being in minus temperatures without heating. Lows of -20 degrees in Texas without electricity had been going for several days. Biden has called a state of emergency and it will be interesting to se how his response is received. The US dollar has been struggling against the pound in the last few weeks and there looks like there could be more.
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