GBP - British Pound
Optimism around the UK economy is ongoing, as Andrew Bailey continues to discuss the UK recovery plan. He suggested that the long-term damage from the pandemic may not even match that of previous recessions. Bailey diagnosed the UK economy saying, ‘it’s positive, but with large doses of cautionary realism’.
An OECD report echoed this sentiment and suggested that global economic growth should be close to 5.5% next year, with UK growth expected to be 5.1%.
In other news, the EU and UK are once again disagreeing on trade terms. European Council President, Charles Michel, has accused the US and UK of blocking exports of COVID-19 vaccines to the continent. He suggests they have imposed an outright ban on vaccine products produced domestically.
The EU are currently facing backlash over their vaccine roll out, as they struggle to distribute the vaccine at the same rate as the other global economic superpowers. GBP/EUR now sits just below the 1.17 handle, having been as low as 1.1450 in the past two weeks.
Investors are waiting for the outcome of the upcoming stimulus talks in the US. It has been reported that the house are scheduled to vote on a $1.9 trillion US Dollar stimulus package. The $1.9tn will be passed on to the public in the form of a $1400 account injection and will likely lead to a bounce in the retail sector. The $600 injection given in December caused equities to spike as many used the cheque as an entry into the stock market. Economists are worried about the affect this package will have on inflation and the price of the US dollar. The theory suggests that the package will weaken the US dollar, however as we have seen in the past, markets can behave counterintuitively.
The European Central Bank are expected to leave their economic fight against COVID largely unchanged. It’s been suggested that their stimulus envelope may be altered, however interest rates will hold steady and new forecasts will be offered. Their growth expectations could remain lower than most of the world, partly down to the current vaccine struggle.