One of the main catalysts for the consistent increase of the pound is due to how well the UK economy has dealt with Covid-19 with its immediate rollout of the vaccine.
The pound continues its bullish movement against its major counterpart with the pound reaching the heights of 1.1833 against the Euro but still struggling to make major gains on the Dollar as it remains within the regions of 1.38.
One of the main catalysts for the consistent increase of the pound is due to how well the UK economy has dealt with Covid-19 with its immediate rollout of the vaccine. There are currently 39 million people who have received both jabs (translating to 75% of all adults). This has now allowed the government to expand and focus on their vaccination age range from 16 years starting from this week.
The UK is currently experiencing a very strong economic recovery, as the UK has the fastest growth within the G7 group of countries. The UK economy grew by 4.8% in the second quarter of 2021 and rose in June by 1% as the lockdown restrictions were eased. Just to put the UK’s economic growth into perspective, the unemployment rate has dropped by 0.2% which was lower than the previous quarter. However, Chancellor Rishi Sunak stated “I’m still not complacent, the shock that the economy and the public finance has experienced has been significant and it will take us time to full recovery” after he spoke with sky news last week.
As the economy continues to grow, this recovery could still be damaged by a couple of different factors. One is the constant increase of the delta variant in the UK. Public Health England has mentioned that there is an early sign that people vaccinated against Covid 19 may be able to transmit the more contagious strain as easily as to those who are not. If this transmission is not going to be prevented, it could bring another strain to the economy and could set the recovery back resulting in the currency weakening. Furthermore, despite the decrease in unemployment in the UK, the government’s furlough scheme will be coming to an end this September which could show a true reflection of its unemployment rate.
There is no major economic news that will be released this week that could cause some volatility in the market but do get in touch to keep up to date.
A ‘SLOW AND STEADY’ RECOVERY
The Eurozone has shown a slow and steady recovery as the bloc bounces back from the effects of the pandemic. Looking at the vaccine distribution, so far there have been 230 million people fully protected from the virus. This translates to 62.2% of adults within the EU. Malta currently leads the way as they have provided more vaccines than any other EU countries and this is followed by Iceland and Denmark (this of course is subject to each countries population). As cases rise within the bloc, last week France had the Covid-19 health passes come into full effect. This is to put more importance on people getting vaccinated as well as being able to prevent the spread of the virus.
Anyone wanting to go to a bar, restaurant, café as well as travel must have a health pass. This would track if someone has had the vaccine or a negative test result as well as recovered from the virus.
The EU’s Unemployment rate remains high, but it is slowly showing some signs of positivity. Currently, the unemployment rate sits at 7.3% which is the lowest it’s been since the pandemic began compared to where it was in March where the unemployment rate was at 8.2%.
Looking at last week, one of the main reasons why the single currency was weakened was due to the release of the ZEW economic data as it dropped to 42.7 points from 61.2 points. ZEW is the Centre for European Economic research and based on the last economic release, one of the main reasons for its major decline could still be the effects of Covid-19.
There are no major economic data releases that could cause some movements for the single currency but do get in touch for the latest rate movement.
PANDEMIC AFFECTED INDUSTRIES ON THE RISE AGAIN
The US economy continues to grow as 943,000 jobs were added in July with the unemployment rate dropping to 5.4%. This has been a reflection of how the Dollar has been performing within the last week.
As the unemployed decrease across the country, industries that have been highly affected by the pandemic could make a return sooner which could boost the economy back to its pre-pandemic level. 34,000 jobs that were created were within the hospitality and travel industry and with the return of the travel industry, this could create more optimism within the country.
Furthermore, President Joe Biden announced early this month additional steps to incentivise the US to be vaccinated. He was looking to pay $100 for anyone willing to step up and get vaccinated. States such as Minnesota, New Mexico, and North Carolina have already implemented this incentive. President Biden says that this incentive has resulted in an increase in jabs by 25% in daily vaccination rates.
There are no economic data releases today however tomorrow will be the release of the retails sales month by month figure which could have some impact on the Dollar.
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