Daily Currency Update

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NHS under pressure

GBP - British pound

Sterling seems to be feeling the effect of the UK national lockdown, brought about by uncontrollably rising COVID rates. Friday’s figure of 1365 is the highest number of deaths since the pandemic began, as it is announced that the UK will face a lockdown until 23rd March. With drop in GBP, an increase in unemployment and decreasing productivity, analysts believe that this may spur the Bank of England to cut interest rates into the negative for the first time at the next meeting on 4th Feb. GBP/USD has slipped back into the 1.34 trading range for the first time in 2021. Scientists continue to warn of a potential worrying spell ahead for the NHS, where hospitals are overrun. This will continue to limit the upside for GBP. Having said this, as more of the nation are vaccinated, the risk and burden to the healthcare system will decrease and the government have already stated that all who wish may receive the vaccine by Autumn. Reports have also surfaced claiming the vaccines will protect against the new strains of the virus.

Key Movers

The US Dollar strengthened across the board recently as global risk appetite continues to be supressed. The US unemployment rate continues to sit at around 6.7% and it is expected that once Biden is inaugurated in the coming weeks, a larger stimulus package will be passed. Trump has declared he will not be attending the inauguration, which suggests hostility continues between the parties. US Dollar strength is expected to continue over the next month or two, particularly as Biden has already acknowledged that he will focus on vaccine distribution. This week we expect talks from the Fed and Christine Lagarde as well as US retail sales and inflation. With such limited data releases, expect markets to move on headlines, rather than fundamental data.

Expected Ranges

GBP/USD: ▼ 1.3400-1.3570

GBP/EUR: ▼ 1.1020-1.1150

GBP/AUD: ▼ 1.7430-1.7580