- The British pound was the best performing currency on Monday amid ongoing optimism over vaccines and the UK’s economic reopening.
- GBP / USD has risen above the 1.3900 level to set new multi-year highs.
It has been a stellar session for the British pound, even though market volumes are low due to market closures in China and North America. The pound has managed to regain the 1.3900 level, although volatility has decreased since European participants left the market around 17:00 GMT. Volumes should pick up again as of 23:00 GMT, as the Asian session rolls around. At present, the pair GBP/USD it is trading higher by about 0.5% or 60 pips on the day. In terms of performance on the month, the pair is up more than 1.5% and, outside of the G10, it is only being beaten by AUD and NOK.
In terms of what is driving the GBP’s outperformance; The weekend saw overwhelmingly positive and familiar news about UK vaccination efforts. The country has met its self-imposed goal of vaccinating the four highest-risk groups by mid-February. As of Monday, more than 15.3 million people have received their first vaccination, meaning that nearly a quarter of all adults in the UK have been vaccinated.
Meanwhile, recently reported infections continue to decline (fewer than 10,000 new cases were reported on Monday, down from highs of more than 70,000 a day in January) and the daily death toll has also seen a sharp drop and been on the decline. the 200 over the past two days (although the daily death toll is typically lower over the weekend due to reporting / procedural issues). Reports over the weekend suggest that the government is forecasting the number of hospitalized Covid-19 patients to halve in the next month.
As a result of the UK reaching a major vaccination milestone and the continuing sharp drop in new infections, hospitalizations and deaths, the conversation has inevitably shifted towards economic reopening. British Prime Minister Boris Johnson said he will release the UK’s roadmap out of the blockade on February 22. This will start with the possibility of schools reopening on March 8 and some restrictions on outdoor socializing may be eased. Restrictions on nonessential retail and hospitality are likely to ease in April. Parliamentarians skeptical of the lockdown within the Conservative Party are reportedly putting a lot of pressure on the UK Prime Minister to reopen the economy as quickly as possible. Assuming vaccines work, the stage is set for a UK economic outperformance later in the year as the country enjoys herd immunity for the summer.
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