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Coronavirus restrictions eased further in England

GBP - British Pound

England reached another milestone this morning as coronavirus restrictions were relaxed further allowing non-essential retail to reopen for the first time since the turn of the year. As per the road map outlined by PM Boris Johnson back in February, shops such as hairdressers, clothing outlets and gyms can open their doors again as the UK inches its way back to something resembling normality. Another much awaited part of the economy being allowed to trade again is the hospitality sector with restaurants and pubs allowed to serve customers outside as long as they are not in groups of more than six. Given the chilly weather it may be another day or two before many take up the offer of a proper pint or glass of wine however with UK coronavirus cases continuing to decline and the vaccine programme continuing apace everything is currently going to plan. Similar loosening of restrictions are also taking place or are due to very soon in Wales, Scotland and Northern Ireland with the whole UK services sector praying there is plenty of pent up demand for the public to go out and spend spend spend!

The success of this next stage of relaxations could spur the pound back to life after it slipped back against most of its peers over the past week or two. Indeed, both GBP/USD and GBP/EUR are pushing higher this morning with rates of 1.3730 and 1.1560 respectively being shown at the time of writing. It’s a pretty quiet week on the data front from the UK so news about retailers takings and vaccine supply will likely guide sterling's direction as well as events further afield.

Key Movers

Away from the UK the main talk in the FX space over the past few weeks has been the resurgence of the dollar and the timing of when the US Federal Reserve will decide to tighten policy as the US vaccination programme begins to build serious momentum. Despite the huge number of jabs and massive stimulus being implemented by the new administration, Chairman of the Federal Reserve Jay Powell has resisted talk of tapering the supply of financial support being handed out in an effort to retain business and consumer confidence ahead of what could be a huge rebound for the world’s largest economy. Powell has resisted to be drawn on the issue of inflation which had seen US 10 year Treasury yields spike over recent weeks. As a result of this many analysts will be looking to tomorrows US CPI numbers from the States which are predicted to show an uptick in inflation for March of 0.5% compared to February. Should these beat estimates then Powell may have to acknowledge there is growing need to reduce the flow of cash it is feeding into the economy in an effort to control rising prices.

Away from America, the EU's vaccination programme has shown signs in recent days that it slowly getting into gear with higher numbers getting the jab throughout the bloc. Despite the improving pace it’s likely the EU will be several weeks behind the UK and US in getting all adults vaccinated so expect this to continue to act as a drag on the shared currency until the gap narrows substantially and the big economies of France, Germany and Italy can unlock their economies fully, or at least put in place plans to.

Data is thin on the ground from the EU this week so the main event that will draw traders attention is likely to be a speech from European Central Bank chief, Christine Lagarde on Wednesday afternoon. The online event hosted by Reuters involves a Q and A session in which no doubt Lagarde will have to give answers on the economic health and expected pace of recovery of an economy battered by the pandemic. EUR/USD sits at 1.1880.

Expected Ranges

GBP/USD: 1.37 - 1.3830 ▲

GBP/EUR: 1.1520 - 1.1630 ▲

GBP/AUD: 1.7990 - 1.8140 ▲

GBP/NZD: 1.9470 - 1.9620 ▲

GBP/CAD: 1.7210 - 1.7340 ▲
SD: 1.1835 - 1.1940 ▲