Sterling’s steady rise against the euro has been a theme of our market reports over the last couple of months. The view taken by many investors is that the UK’s ‘Roadmap’ to the easing of restrictions looks to be on track and therefore many UK industries will soon be able to operate to at a higher capacity than their European counterparts.
Boris Johnson announced on Monday the government’s roadmap to cautiously ease lockdown restrictions in England. In a statement to parliament, he paid tribute to the extraordinary success of the UK’s vaccination programme and the resolve of the British public in following the lockdown restrictions, which has helped to cut infection rates and reduce the spread of the virus.
He also set out the latest vaccine efficacy data, with Public Health England finding that one dose of the Pfizer vaccine reduces hospitalisations and deaths by at least 75%.
The International Monetary Fund (IMF) raised its forecast for British economic growth, which is set to outpace the eurozone and US economies this year after its slump in 2020 but is unlikely to regain its pre-pandemic size until 2022. The IMF have forecast Britain’s economy to grow by 5.3% in 2021, up from a previous forecast of 4.5% it made in January.
Britain has suffered Europe’s highest COVID-19 death toll and its economy shrank by almost 10% last year, the worst performance among the region’s big economies except for Spain.
Despite the continued positive sentiment around the UK’s vaccination rollout, roadmap to recovery and the positive news for GDP forecasts. On Tuesday sterling endured its worst day of trading against the euro in 2021, with the currency pair sliding over a percent to 1.165 at the close of business. This downward trend continued throughout yesterday’s day of trading with the pair sitting below the 1.16 resistance level at 1.156 at the time of writing, with sterling hitting a 6 week-low against the euro.
Sterling has also lost ground against the dollar with GBP/USD rates slipping to 1.374 at the time of writing. GBP/USD rates continue to be volatile with the market moving well over a cent throughout the day’s trading.
The GBP/EUR pairing is down almost 2% this week and with analysts continuing to back the short-term recovery of the pound, now may be an opportune time for those wishing to sell euros. If you have an upcoming EUR/GBP exchange, it may be worth reaching out to your account manager for further information.
The European Medicines Agency (EMA) announced yesterday that it had found a possible link between AstraZeneca’s vaccine and reports of rare cases of blood clots in people who have received it. Safety concerns have prompted more than a dozen countries in recent weeks to suspend use of the vaccine, which has been given to tens of millions of people in Europe and the UK.
EU health ministers have been told that the EMA’s decision on the safety of the vaccine will have immediate implications for vaccination plans. The announcement is a fresh setback for the vaccine, however, both the EMA and the World Health Organization maintain the benefits outweigh the risks of the vaccine. “The risk of mortality from COVID is much greater than the risk of mortality from these rare side effects,” EMA’s executive director Emer Cooke said on Wednesday.
AstraZeneca has said previously its studies have found no higher risk of blood clots in those vaccinated than in the general population.
EUR rose in value against GBP and USD yesterday despite fresh concerns surrounding the AstraZeneca vaccine and a steep rise in coronavirus infections in France. EUR/USD hit a two-week high yesterday with the pairing breaking through the 1.19 level and sitting comfortably at 1.188 at the time of writing.
Today the European Central Bank will release its latest monetary policy meeting accounts, which aims to provide rationale behind recent monetary policy decisions. We also see the release of Producer Price Index (PPI) data. A reading higher than expected may have a positive impact on euro rates, with a lower than expecting reading likely to shift them in the opposite direction. Please reach out to your account manager for further information.
There has been positive news for the US economic recovery and dollar exchange rates as the IMF expects that the coronavirus vaccine rollout and massive government stimulus will combine this year to produce the fastest annual GDP growth rate in the US since 1984.
"At $1.9 trillion, the Biden administration's new fiscal package is expected to deliver a strong boost to growth in the United States in 2021 and provide sizable positive spill overs to trading partners," said the IMF. The IMF also stated the "unprecedented policy response" to the pandemic means the "recession is likely to leave smaller scars than the 2008 global financial crisis."
There are already signs the US recovery is gaining speed. Data released last Friday showed that American employers added 916,000 jobs in March, the biggest gain since August. The jump in jobs was up from the 468,000 increase in jobs reported for February, which itself was revised up by nearly 100,000 jobs from its initial reading. The gain was also much better than predicted by economists, who expected a strong but more modest increase of 647,000 jobs.
Today sees the release of Initial Jobless claims data in the US, forecast to read 680,000, which is down from the previous weekly reading of 719,000. Any major deviation from the forecast may cause volatility for dollar exchange rates. Keep in touch with your account manager for further information.
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