Prime Minister announces lockdown exit – pound ticks higher
Tuesday 23 February, 2021
Daily Currency UpdateGBP - British PoundSo there we have it, after a number of weeks of posturing with the media and even more weeks of falling infection rates Prime Minister Boris Johnson announced how England (and presumably the rest of the UK) would slowly and gradually exit from the current lockdown restrictions. With a frenzy of Whatsapp messages there has already been a surge of holiday bookings with EasyJet reporting a 630% increase in bookings to some locations across Europe. For the pound the news was largely ignored and insignificant on the face of it although we did see fresh highs on GBP/USD and it has kicked on again this morning. The next key level for GBP/USD will be 1.41 whilst for GBP/EUR it'll be 1.1600. Significantly for GBP/USD the pair is not far away from 1.4240 and any move over this will see Sterling return to levels from June 2016.So whilst great news from Boris Johnson has lit a fuse for Sterling, the question is how long can this last? The pound has been the strongest G10 currency since the start of the year given the success of the vaccine rollout. This 'vaccination trade' is based on the assumption that the UK would then be the first to the party to ease restrictions. The conservative nature of Johnson's easing however may scupper this and the comparative advantage that the UK (and Sterling) has at the moment may disappear.
Key MoversNext up, Jerome Powell, the head of the Federal Reserve as he carries out his semi-annual testimony to the US Senate Banking Committee. All eyes will be on Powell as he speaks and the reaction of the dollar recently indicates that some investors aren't optimistic despite rising inflation levels in the US. There is a thought that Powell may step back from his long term commitment to keep policy very accommodating and we have seen a large reaction in the bond market to reflect this. Either way the US dollar is delicately balanced ahead of this afternoon and there may be more dollar losses on the cards.
- GBP/USD: 1.4000 - 1.4160 ▲
- GBP/EUR: 1.1555 - 1.1600 ▲
- GBP/AUD: 1.7740 - 1.7820 ▲
- EUR/USD: 1.2090 - 1.2180 ▲