GBP/USD has it’s sights set on 1.40 as it heads towards it’s highest levels since April 2018. The main driver behind this surge is due to the encouraging vaccination roll-out in The UK with over 13 million people having now received at least the first of two doses. This impressive vaccine programme has had an evident effect on the number of cases and deaths as we start to see daily cases average around 13,000 compared to the 50,000+ just a few weeks ago. All of this suggests that the governments goal of gradually lifting restrictions Mid-March is becoming more likely, bringing more optimism to Sterling.
The Dollar isn’t enjoying the best of times at the moment mainly due to weak U.S inflation figures for January coming out lower than expected at 1.4%, against the expected 1.6% and worryingly lower than the Fed Reserve target of 2%. Coupled with the struggles in the U.S jobs market, the Dollar is being weighed down against the majority of currencies, indicated last Friday with both Non-Farm Payroll figures falling short of expectations.
Yesterday Jerome Powell stated the actual unemployment rate is closer to 10% as opposed to the 6.3% as publicised in the media last work, mainly because of workers who have left jobs because of the pandemic and other works being classified as employed mistakenly. These struggles are preventing the Fed Reserve from even contemplating a rise in Interest Rates within the near future again causing difficulties for the Dollar.
News yesterday of The EU wanting an extension until 30th April to ratify the Brexit trade agreement isn’t great for either party, albeit Sterling is focusing purely on the success of the vaccine roll-out. More so for the EU, it only serves to create more political unrest with confusion over the implementation of the Northern Ireland Protocol. This protocol was meant to prevent a hard border between Northern Ireland & The Republic, which to an extent it has. But it has resulted in some additional checks taking place for goods travelling between Northern Ireland & the remainder of Great Britain. All of this, on top of the vaccine row the EU entered into at the end of January only highlights the strenuous split between The UK and The EU.