Bank of England leave monetary policy unchanged
The Bank of England (BoE) agreed to leave monetary policy unchanged during their recent meeting, leaving interest rates at 0.1% as well as its GBP 895 billion quantitative easing programme.
The tone of the meeting very much echoed Governor Andrew Bailey’s comments earlier this week, where he stated that the UK economy would recover earlier than anticipated due to a rise in consumer spending when businesses reopen next month.
It’s been forecast that UK gross domestic product (GDP) will grow by 5% in 2021 and that unemployment levels would be less severe than first anticipated. The BoE had previously forecast in February that unemployment could rise to 7.75% this year. This estimate, however, was before Chancellor Rishi Sunak’s announcement that the furlough scheme would be extended to the end of September. Though a specific figure was not given, it was stated that the outlook was ‘more moderate’ than initially expected.
Whilst the UK economic outlook was positive on the whole, there remained an element of caution. The Monetary Policy Committee (MPC) stated that the UK’s economic future would depend on the evolution of the Coronavirus pandemic, the restrictions and measures taken to protect public health, and how households, businesses and financial markets respond to these developments.
GBP/Eur strengthens following BoE meeting
The British pound to euro (GBP/EUR) exchange rate has come under pressure during the past week as a result of rising tensions between the UK and EU. The BoE’s comments, however, appear to have provided support for Sterling. The British pound to euro (GBP/EUR) exchange rate has gained from the optimistic outlook, with the currency pairing trading 0.33% higher at EUR 1.168.
The EU launched legal action against the UK following the UK’s extended grace period with goods traded with Northern Ireland. Additionally, multiple EU countries suspended use of the Oxford-AstraZeneca vaccine over concerns that it increased chances of blood clots.
Hans Kluge, Director of WHO Europe, has slammed these claims and insisted that the vaccine remains beneficial in the fight against COVID-19. “Benefits of the AstraZeneca vaccine outweigh any risks and its use should continue to save lives,” Dr Kluge stated.
Amid the AstraZeneca vaccine debacle, the Eurozone is experiencing a third-wave of coronavirus cases with countries set to impose tighter restrictions over the coming days. The EU will look to today’s verdict from the European Medicines Agency (EMA) as to whether it is safe to proceed with the vaccine. In the meantime, there are around 7.2 million vaccines waiting to be used within the EU.
Pound Sterling remains vulnerable to Brexit headlines
Although the British Pound (GBP) appears to be reclaiming losses, the UK currency has been sensitive to Brexit headlines over the past week, with continued delays in cross border trading.
The British pound (GBP) had been hugely supported by coronavirus vaccine developments, though this now appears to be fading.
That being said, we expect the majority of the British pound’s (GBP) focus to be centred on post-Brexit trade talks in the coming days and weeks, with the end of the transition period fast approaching.
UK Health Secretary, Matt Hancock, revealed yesterday that there would be a delay in administering vaccines to the under 50 age groups as a result of a shortage of vaccine supplies. It had initially been reported that all UK adults could receive their first dose of the vaccine by June, though it’s thought that this could now be a month later than expected.
The NHS confirmed that from the week beginning 29th March, volumes for first doses of the vaccine will be significantly constrained. Vaccinations for the under 50s could begin from mid-April, which is when the UK is looking to introduce the Moderna vaccine, though May seems a more realistic target.
The introduction of the Moderna vaccine is subject to approval from Medicines and Healthcare products Regulatory Agency (MHRA) but it is uncertain as to whether this would cover the shortfall in the Oxford-AstraZeneca jabs. The UK signed an initial deal with the US, which secured 5 million doses of the Moderna vaccine. The order was then increased to a further 2 million in November and then another 10 million in January.
Recent reports have also stated that the Novavax vaccine is 86% effective in combating the Kent strain of the virus and 96% against the original COVID-19 strain. With further jabs due to become part of the UK’s portfolio of vaccines, it’s hoped that the delay to be experienced later this month will not cause too much of a disruption to what has been an incredibly successful vaccination campaign in the UK.