Pound strong ahead of Boris Johnson’s lockdown exit plan
The British pound (GBP) has reached new highs against the US dollar (USD) and euro (EUR) this week as the UK’s COVID-19 vaccination programme continues to administer jabs at a rapid rate.
Yesterday the British pound to US dollar (GBP/USD) exchange rate reached a three-year high, hitting just above the USD 1.39 mark. The same day also saw the British pound to euro (GBP/EUR) exchange rate reach a nine-month best at EUR 1.15. With such positive developments being made with regard to coronavirus vaccines, the British pound (GBP) is likely to remain sturdy in the near-term.
Chris Dix, chair of the vaccine task force, believes it could even be possible for every adult in the UK to receive both doses of the vaccine by August this year. This development would support UK economic recovery further, particularly within the travel industry, which has been one of the hardest hit sectors during the coronavirus pandemic.
The UK entered its third national coronavirus lockdown during the beginning of 2021 and it is currently uncertain as to when restrictions will be lifted. The lack of clarity surrounding the lockdown exit has been difficult for businesses, with currently no indication as to when they reopen. However, this is set to change on Monday when UK Prime Minister, Boris Johnson, will reveal his strategy to gradually end UK lockdown.
As it stands, only essential businesses in the UK remain open, with the public only permitted to leave their homes for essential purposes, including:
- Outdoor exercise with your household or one person from another household
- Going to work
- Buying necessities
- Attending a medical appointment
Though it’s been confirmed that UK schools will reopen in March, Mr Johnson has stated that when it comes to reopening the economy, he will be focussed on ‘data not dates’.
“There are still 23,000 or so COVID patients in the NHS, more than at the April peak last year” said Mr Johnson. “So, we have got to be very prudent and what we want to see is progress that is cautious but irreversible. I think that is what the public, people up and down the country, want to see.”
UK Covid-19 cases remain a concern
Whilst UK coronavirus cases have declined significantly since the beginning of February, figures are still stubbornly high. Rates of infections peaked during January, with new daily cases reaching as high as 68,053. As of 17th February, daily infections had dropped down to 12,717, though this remains significantly higher than daily levels seen last April which peaked at 5,450.
Last week saw 88,000 newly recorded coronavirus cases, which is an average of 157 cases per 100,000. Additionally, there were also 4,598 deaths which took place within 28 days of patients testing positive for COVID-19.
Whilst the number of infections is still substantial, the UK has deployed vaccines at an incredibly rapid rate, which is hoped to support the reopening of the economy. It has been confirmed that over 15 million people within the UK have received their first dose of the coronavirus vaccine and over 500,000 have also received their second dose.
This week, Boris Johnson and senior ministers will thoroughly examine the latest coronavirus statistics in order to provide a comprehensive roadmap for exiting lockdown on Monday.
Easing out of lockdown too quickly, however, could spark a new wave of COVID-19, which would further devastate the UK economy. It’s, therefore, imperative that the easing of restrictions is done gradually and mindfully.
Pound Sterling supported by Bank of England comments
In addition to the UK’s successful vaccination programme, the British pound (GBP) has also been supported by comments made by Bank of England (BoE) Governor Andrew Bailey. Mr Bailey stated the UK economy would experience a sharp recovery following the easing of restrictions and also that the BoE would stay away from negative interest rates for the time being.
BoE Chief economist, Andy Haldane, also recently made comments that the UK is desperate to begin spending again. Mr Haldane stated that the UK economy was about to turn “a decisive corner with enormous amounts of pent-up financial energy waiting to be released, like a coiled spring”.
With the UK’s third national lockdown about to enter its third month, many have been desperate to socialise with friends and meet up in bars and restaurants once again.
Whilst people’s incomes have largely unaltered during the coronavirus pandemic, many have managed to make reasonable savings as a result of lockdown. It’s thought that as a nation, across the three lockdowns, over GBP 250bn will have been saved collectively.
Unsurprisingly, the UK economy is forecast to shrink during Q1 due to the third lockdown, with the BoE forecasting a 4.25% contraction. However, the outlook for the second half of 2021 looks much more promising, with continued vaccination deployment paving the way for economic recovery. It’s thought that the UK economy could return to pre-pandemic levels by March 2022.