The International Monetary Fund announced positive figures for the UK for the first time since the pandemic has taken place, stating their forecast is the UK will grow by 5% this year. They suggested that much of the long term damage predicted by economists at the start of the lockdowns could well be avoided with the UK and advanced economies getting quickly back on track. They did however warn that there is a danger that some economies could well be left behind if there wasn't more down to help pick up growth in the short term. Several of the southern European economies are going to struggle to pick up growth as travel to the likes of Spain and Portugal for summer holidays still look under threat.
Boris Johnson yesterday warned people to not start to book holidays as even though the country is on course to achieve the Governments reopening roadmap, there is always the prospect of the status quo changing. The Prime Minister is cautious that once the travel restrictions are lifted the UK with only small number of cases will see the population travel to areas with variants and higher infection rates. The UK is still very much on track with the vaccine rollout with April dubbed the month of second jabs where there is expected to be 18 million people in the top 9 risk categories will all find themselves fully vaccinated. This according to the research means that 99% of the deaths from COVID-19 will now be protected against.
As the there is cause for concern regards to the Astrazeneca vaccine in a piece of good news the Moderna vaccine is coming into circulation in Wales today. The UK has ordered 17 million of these vaccines and this could help to plug any supply shortage in the short term that has been discussed recently. There is also talk that the Janssen Johnson & Johnson vaccine is expected to be approved shortly which is a 1 shot only vaccine. The Government are thought to be expecting the 1 shot vaccines to help them to make up any shortfall down the line that might come as the Astrazeneca supply looks to slow down. Considering the talk of clotting in young people in the Astrazeneca vaccine the Janssen vaccine probably cant come soon enough for the Government.
Sterling yesterday dipped down following the Prime Ministers warnings that the country still had a distance to go before everything was back to normal. From the pounds perspective the UK vaccine rollout has been a keen driver however for the GBP/EUR rate to climb into the 1.18's this momentum will need to continue in the coming weeks. If Europe starts to catch up with the UK then this could se more of what we saw yesterday and the pound may find itself getting clawed back.
An EU report released by Bloomberg yesterday suggested that the EU hopes to have the majority of their population vaccinated by the end of July with enough vaccines expected to be ready by June time. The Commission had a target set to vaccinate 70% of the population by the end of August and this is now likely to be achieved. The EU which got off to a slow start with a few misfiring attempts following vaccine concerns is now expecting to move at full steam ahead.
This could have a positive effect on the euro however it may not be for a few months until concerns about the immediate spike are suppressed. France had entered into a month long lockdown before the weekend with many expecting Germany to follow having allowed families to meet over the Easter break. It will be a few weeks before we start to see the repercussion of the lockdown not being implemented.
However come July there could well be optimism for the EU countries and this in turn could help to see some euro strength. The European Central Bank is thought to be considering further stimulus to help the economy something it has been no stranger to the last few years. The Coronavirus relief package for the EU is still held up with €700bn waiting to be distributed to some of the EU nations suffering most however the stronger economies no far to well who will be picking up the bill.
The US Government overnight ruled out the use of Covid passports sighting that the populations privacy and rights should be protected. This is in the wake of talks in the UK regarding a Covid passport system which would see a system put in place before the end of the year. The US economy is said to be on something of a boom at the moment with the IMF forecasting that the US surpasses its pre pandemic economy size this year. The IMF said they expected to see 6.4% growth in the US up 1.3% from their prediction earlier in the year. The US economy across the board is said to be rocketing with ISM Manufacturing Index posting its best reading since 1983, this is the optimism level of managers in the manufacturing industry. Furthermore, just under 1 million people found a new job last month with March the best month since August last year.
The boost for the US economy has been solely attributed to the $1.9tn stimulus package that President Joe Biden pushed through the congress and senate. In a unprecedented policy response the US economy has seen a huge boost, this is the first time on a mass scale as Government has directly given the population money. When you think in Europe and the UK the central bank continuously buy debt and sell bonds in order to stimulate the economy giving consumers the money has had an impact short term effect. There could of course be longer term consequences as inflation will see the price of goods rise and as it's unlikely the money will keep coming from the Government so this could increase the poverty line as time goes on.
However, in the short term one of the biggest winners is currently and looks set to be the US dollar, as the pound is rising across the board the greenback is taking back some of the ground lost in 2021. The GBP/USD rate touched just under 1.42 at the end of February but we're now seeing a movement back down into the 1.30's with the interbank exchange rate this morning just creeping to 1.378. If you're looking at buying or selling US Dollars with the predictions of US economic growth there could be abundance of volatility on its was so make sure you're in contact with your account manager.
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