Last week we saw the pound reach up to 1.17 GBP/EUR and 1.41 GBP/USD on the interbank but ending the week at 1.15 GBP/EUR and 1.39 GBP/USD.
One of the reasons why the pound has been strong was due to the announcement about interest rates that were made at the beginning of last month. However, the main reason for its bullish movement was because of the Prime Minister’s announcement on Monday where he implemented a road map to ease the lockdown starting from the 8th of March. He states that all schools will open and after-school sports activities are allowed. Should the roadmap go to plan, the whole of the nation could be back to normal by the 21st of June as the Prime Minister has proposed.
The main driver for this road map is the success of the COVID-19 Vaccine rollout. After successfully reaching the target of 15 million vaccinations on the 15th of February, the NHS has been relentless. So far 19.9 million people have received their first jab and 736 thousand are now fully protected (this is from the time of writing). After the implementation of the roadmap and the vaccination figures, there is light at the end of the tunnel to economic recovery.
However, there are a couple of reasons why the pound could weaken as Boris Johnson has also stated that no vaccine is 100 percent effective against any diseases and it is impossible for the virus to be eradicated which could lead to further hospitalizations and further death. Another thing that needs to be taken into consideration is any further mutation of the virus.
Also, some analysts are considering the pound as a risky currency for investors. Chief UK Economist Paul Dales has stated “The pound has been behaving more like a risky asset than a safe haven one since the start of the pandemic. Indeed, the correlation between the FTSE 100 and the pound has risen sharply since the start of 2020”
All in all, there’s great optimism that is surrounding the UK economy which is leading towards the right direction with the end in sight.
A key date this week for GBP is the Annual budget release on Wednesday 3rd of march which will outline the government’s budget for the year. This includes any spending and financial objectives.
If you have any questions about the pound, please contact your account manager for any latest developments.
The eurozone continues to struggle and is still trying to figure out how or when it will open to start its economic recovery which has resulted in putting massive pressure on its currency. The impact of the coronavirus has certainly made a huge dent on major and minor businesses and it seems like it could take a while before a return to normality.
As the vaccine has not been rolled out as quickly compared to the UK, it may take quite some time before the eurozone is out of the woods. Looking at the positive side however, the number of people that have been protected by the vaccine has increased. Based on last month's vaccine figures, the Netherlands (remains as the lowest figures to roll out the vaccine) have now vaccinated 5.5 people out of 100 from the previous 1.62 out of 100 people. Portugal and Greece are one of the highest countries to roll out the vaccine as they have both vaccinated 8.5 and 8.2 people out of 100 from the previous 2.82 and 3.32 out of 100 according to last month's figures. These could be signs that there is action being taken to fight the virus, but it does not take away the fact that the eurozone is still well behind in comparison to other countries.
The European Central Bank is preparing for its biggest month in bond yield increase for the last 3 years. There has been calls for boosting the pace of the ECB bond purchase to reduce the rise in borrowing cost.
The ECB in under a lot of pressure to make the borrowing cost easy for the coronavirus-stricken bloc through its Pandemic Emergency Purchase Programme (PEPP).
In summary, it looks as though I may take a while for the euro to recover but by looking at the bigger picture, there seems to be some order in place that can be acknowledged for the euro to rise again.
In regards to any economic releases this week, there aren’t any major data that is going to be released that could heavily affect the euro. If you have any questions or concerns about the euro, please get in touch with your account manager.
There have been many factors why the dollar has struggled against major currencies, one of those reasons was due to the government's slow reaction to the pandemic. America still holds the highest number of deaths globally with 512 thousand deaths out of 2.53 million deaths around the world.
However, there has been a great optimism that has been going around as the vaccine rollout is starting to take effect. There have been 72.8 million people that have been vaccinated with 23.7 million having received 2 doses of the vaccine.
Also, another company has been approved to roll out their own vaccine as the company Johnson & Johnson will now be distributing their vaccine. In comparison to Pfizer and AstraZeneca, anyone who takes the Johnson & Johnson jab will only require 1 shot which will speed up the process. Many are still skeptical of this as it may not be as effective as the other 2 companies.
With the number of vaccines being approved across the board, several states have eased their lockdown and have opened some bars and restaurants, and have let a few thousand people inside sports stadiums. Some analysts think that this is premature because the deaths may be decreasing but the number of daily deaths is still quite high.
Furthermore, President Biden’s 1.9 trillion stimulus package has been approved to tackle the increasing growth of unemployment. Speaker of the United States House of Representatives Nancy Pelosi voted largely along on Saturday morning. The package will include an extension to programs designed to assist unemployed Americans and to provide financial support for state and local government.
Based on these factors, despite the lack of action towards the virus at the beginning, we are now starting to see a plan from the US government which could help push the dollar back to where it was pre-pandemic. The only thing that could push the dollar down is if the government increases the price of goods to make up for what was lost during the pandemic.
There are several economic data release the needs to be looked out for this week which could affect the dollar the earliest one being Institute for Supply Management which will be released today. This measures the level of a diffusion index based on surveyed purchasing managers in the manufacturing industry.
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