The last week has seen uncertainty regarding the new variant of COVID-19 as it continues to pose a threat for the easing of restrictions. In previous months the speed of the vaccination rollout had a positive impact on the strength of GBP, compared to other European countries the UK has responded quickly and effectively once the vaccine was approved.
As of the 25th may over 61 million vaccinations had been administered. The UK government remains optimistic that restrictions will be eased further in the coming weeks, however 8 councils where the Indian variant has surfaced have issued advice on additional precautions people can take to protect themselves and others around them. This was a back track on previous information listed on the government website advising that people should avoid travelling in or out of the affected areas. Shadow health secretary Jonathan Ashworth accused the government of imposing "local lockdowns by stealth, by the back door". The government responded to this Tuesday evening by releasing a statement confirming that they were not imposing local lockdowns. If further lockdowns are to be imposed in the future this could have further detrimental effects on the UKs economy and unemployment figures.
Not much coming up this week for data releases for the GBP however next week, 1st June Bank of England governor Andrew Bailey is set to make a speech at 4pm.
As the countries in EU continue to move out from their latest lockdowns the euro begins its economic recovery. In recent months, the vaccine rollout for countries within the EU have been notably slower in comparison to the UK & US. However it now seems that the vaccination drive has now been ramped up and looks to be on track to vaccinate all eligible adults by the end of July.
With a high percentage of the Eurozone on the ‘amber’ travelling list from the UK there are hopes in the coming weeks this will be downgraded to ‘green’ which should kick start the Blocs economy with a return to the tourism industry. Whilst there are talks of a vaccination passport nothing is yet to be officially published to confirm future travelling plans and what restrictions if any will still be in place.
Whilst this is a quiet week for euro economic data releases next week Germanys retail sales figures are due to be released. If figures are as predicted this could create market volatility for the EUR. There are a few speeches from the Members of the European Central Bank in the coming days which may give an insight into the ECB’s policies going forwards. As inflation continues to rise in the Eurozone there is a cause as to how they’re going to stem that especially as raising interest rates could have further reaching consequences.
Last week saw the USD drop to a 3-month low against the EUR. This theme continued on during Tuesday's trading as the USD struggled against many of its major currency pairings falling up to 0.3% at times. USD has fallen more than 10% in the last year.
On Tuesday federal officials in Colorado announced a COVID-19 vaccine initiative follow the success of a similar scheme in Ohio. They will be offering 1 million USD to five state residents who have received their COVID-19 shot. This initiative has been named ‘Colorado’s Come Back’ cash and has hopes it will boost Vaccine numbers for the state. With many states in America now opening back up post pandemic the government are keen to get as many people vaccinated as possible the help aid the recovery of the US economy in future months.
Today is fairly quiet for US data however tomorrow there is a flurry of economic information. Durable Goods orders releases the number of long term purchases, such as white goods and motor vehicles, this is a indicator of the countries productivity. Secondly there is GDP which is expected to once again show a big jump for Q1 of this year. 6.4% was the previous reading however we’re expecting 6.5% on this occasion. Any variation on that level could cause movement for the US Dollar, especially if below as there is real optimism that the economy will really jump in the coming months.
The GBP/USD rate is currently hovering around the mid 1.41’s just below the 5 year high, so it may not be a surprise to see new highs tested soon.
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