PM's 'roadmap' key for Sterling

Hi everyone,

Let's start today's report mentioning just how well Sterling performed last week. Over 1% was gained against the majority of currencies with two significant barriers hit, firstly £-€1.15 & then £-$1.40. Those of you that traded last week saw the Pound-Euro hit a 10-month high & Pound-US Dollar a 3-year high. Sterling sits comfortably at the top of the best performing G10 currency in 2021 so far. 

It's been clear for about 6-weeks that the £'s strong performance is tied to the successful rollout of vaccines in the UK. On Friday, a third of the adult population in the UK had received their first vaccination. All of the adult population is expected to have the vaccine by August in the UK, compared to a maximum of 70% in Europe. Reports today have shown that the vaccines have substantially reduced hospital admissions in Scotland (England release their figure later today) by over 85%. All of the data is positive and puts the UK in pole position to unlock restrictions ahead of most other nations. 

However, leaked reports suggest that the Prime Minister's lockdown exit strategy will be a cautious one when delivered this evening. If a slow approach is adopted, we may see the Pound lose momentum and may even see a reverse in recent fortunes. Sterling's outperformance mode is currently founded on the expectation that the UK will open up the economy way ahead of the Euro-Zone. Traders have been aggressive in both short and long positions on the Pound, but if it is to be a slow reopening of the economy, then Sterling could be in overbought territory. Germany are due to be reporting their four-stage plan to ease lockdown tomorrow. 

We have a quiet data week ahead with only the US really offering much of interest, so it's all down to Boris tonight who has the power to majorly influence how Sterling performs in the days and weeks to come.

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