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Sterling supported by drop in Covid-19 cases

GBP - British Pound

GBP/USD hit 1.3755 yesterday morning. Its highest level since May 2018 as vaccine rollout news continued to support the pound. It has retraced a touch since however is continuing to hover around 1.37 as it appears the latest lockdown is really starting to impact on coronavirus transmission numbers. Sundays 18,607 new confirmed cases, which was reported yesterday, was the lowest figure recorded this year and around 4k lower than last Sunday when numbers tend to fall because of a reporting lag over the weekend. Another 320k got their first vaccine dose which was around 100k more than confirmed last Monday so it seems the UK governments plan to vaccinate the most vulnerable members of society by Feb 15th remains well on track.

Whilst the pound may have dropped against the dollar the fall compared to the euro was much more muted and indeed GBP/EUR is heading back towards the 1.1350 handle we saw yesterday morning as the European Union’s vaccine programme lags behind those of the UK and US. As long as the pace of UK vaccinations continue to curve upwards then the sooner the UK economy will be able to reopen which should hopefully prompt a strong rebound in GDP for the second quarter of this year. UK Prime Minister is expected to outline his plan for a gentle winding down of restrictions on the 22nd Feb however he will be wary to loosen too quickly as a way of trying to ensure this lockdown is the last.

Israel which is leading the way with its vaccination programme has seen a dramatic fall in infections especially in the over 60's evidencing its huge push to get as many jabs done is working. The Middle Eastern country leads the way with well over 50% of its population now having received at least one jab.

Key Movers

The euro wobbled yesterday with EUR/USD dropping to a low of around 1.2055 despite the one data release of note from the States missing forecast. The monthly ISM Manufacturing PMI printed 58.7 a drop from the previous months 60.7 however this does represent eight consecutive months of expansion for the sector with levels far higher than recent comparable surveys from the UK and EU. The US vaccine programme is also well ahead of the EU's with nearly 10% of Americans now having received at least one dose. President Joe Biden has pledged to provide 100m vaccines in his first 100 days of office.

The Republicans yesterday declared they would like a stimulus package of around $600b to be passed by the Senate, well short of the $1.9t Joe Biden is aiming for however at least the two sides can now hopefully work to find a middle ground and get extra support to a country that has been ravaged by Covid-19 with a death toll fast approaching 500k.

Stock markets are all in the green today as last weeks concerns over alleged market manipulation by small retail traders on certain stocks start to fade.

Its another quiet day on the data front so expect vaccine news to continue to dominate currency movements before we get to Thursdays Bank of England interest rate decision and Fridays monthly jobs data from the States. EUR/USD trades at 1.2075 with USD/JPY at 108.45

Expected Ranges

GBP/USD: 1.3650 - 1.3760 ▼

GBP/EUR: 1.1275 - 1.1360 ▼

GBP/AUD: 1.79 - 1.8045 ▲

GBP/NZD: 1.8980 - 1.9155 ▼

GBP/CAD: 1.7465 - 1.7610 ▼