US Dollar weakened by Jobless Claims
The US dollar (USD) has shown signs of weakening as a result of new jobless claims. New signings had seen three consecutive weeks of decline, though progress slipped last week with an unexpected rise. Fresh jobless claims reached a total of 861,000 in the week ending 13th February, which is 16,000 higher than the previous weeks’ signings.
The disappointing figures have caused the US dollar (USD) to slip against the (EUR) with the euro to US dollar (EUR/USD) exchange rate now standing at USD 1.21.
US President, Joe Biden, aims to tackle the issue of unemployment with his USD 1.9 trillion stimulus package proposal, which he claims will bring the US ‘roaring back’. The bill promises to provide USD 1,400 individual stimulus cheques for those who earn up to USD 55,000 a year and USD 2,800 to married couples earning up to USD 100,000 a year. Though the US Senate questioned the costs involved, they voted to progress the bill for approval in congress during early February.
As the US waits for the coronavirus stimulus bill to be passed, coronavirus infection rates have declined significantly. The peak of the virus in the US was experienced in January where daily infections rose up to 300,000. As of 18th February, daily infections were 71, 874, which remain a substantial figure but also a significant reduction from last month’s levels.
Pound sterling surges against currency competitors
The British pound (GBP) continues to surge against both the US dollar (USD) and euro (EUR) this week as a result of the UK’s successful COVID-19 vaccination programme.
Earlier this week saw the British pound (GBP) reach a 3-month high against the US dollar, reaching just above USD 1.39 and a nine-month best against the euro (EUR), hitting EUR 1.15.
Today, however, has seen the currency pairings rise even further, with the British pound to US dollar (GBP/USD) exchange rate reaching USD 1.40 and the British pound to euro (GBP/EUR) exchange rate climbing to EUR 1.16.
News that over 15 million vulnerable British citizens have received the first dose of the coronavirus vaccine and over 500,000 on their second dose has fuelled hopes for a faster UK economic recovery than anticipated.
Neil Jones, head of foreign exchange sales at Mizuho Bank stated that “the British pound (GBP) is benefiting from its vaccine currency status. Expectations for a more rapid economic recovery are kicking into play”.
Economists have forecast that given the British pound’s (GBP) current momentum, that it is now on track to soon reach EUR 1.20 against the euro (EUR).
European health workers suffer from Astrazeneca side effects
The euro (EUR) has struggled during recent weeks due to the Eurozone’s slow response to deploying coronavirus vaccines. After encountering a shortage in vaccine supplies, some European countries have now raised concerns regarding the Oxford-AstraZeneca vaccine after a number of healthcare workers experienced side-effects.
The side effects from the AstraZeneca vaccine, which include headaches and a high temperature, have caused regions in Sweden to pause administering the vaccine and some Germany workers refusing to take the vaccine.
A spokesperson from AstraZeneca stated that the reactions were “as we would expect based on the evidence gathered from our clinical trial programme”. They also confirmed that none of the side effects were serious and that they would continue to monitor the situation.
Delays in the Eurozone’s vaccination programme have weighed on the euro (EUR) in recent weeks, so any further disruptions to operations is unlikely to provide support for the single currency.
Uk Looks Towards PM’s Roadmap Out Of Lockdown
UK Prime Minister, Boris Johnson, will reveal his plans to slowly exit UK national lockdown on February 22nd, which is hoped to provide further support for the British pound (GBP).
Reports indicate that Mr Johnson is still preparing plans, which will continue to be worked on over the weekend. The UK government has refused to indicate what is likely to be revealed during Monday’s lockdown exit plan, though reduced rates of infection suggest that the vaccines are helping to lower transmission of coronavirus.
Whilst pressure is being placed on opening up the economy, scientists have warned against ending lockdown early. Foreign Office minister James Cleverly stated that “ultimately we want to open up society, the economy, as much as we are able, but only on the condition that it is safe to do so.” In relation to summer holidays, it was stated that the government is ‘assessing the numbers’.
Whilst Boris Johnson will aim to give as much detail as possible on Monday, he has stated that he will be focused on ‘data and not dates’ when it comes to easing restrictions.
Schools currently remain the priority and have been confirmed to reopen in March, though it’s thought that the hospitality industry could begin a phased opening from May.
If vaccinations within the UK continue to be administered at the current impressive rate, it’s hoped the majority of businesses could reopen by the summer. As a result, it’s forecast that the UK economy will experience a sharp uptick during the second half of 2021. UK gross domestic product (GDP) has been forecast to see 4.2% growth for this year and 5.5% for 2022.