Sterling recovers from Friday's poor data

Hi everyone,

 

Last Friday saw the Pound lose its multi-month highs against the majors after worse than expected economic data. We wondered whether this was the start of a downturn, but today £ has jumped back up and is the green once again across the board. 

 

Market sentiment has started the week on a positive note and Sterling has risen with it. Investors seem to be once again looking through the near-term concerns of the pandemic and are focusing on the $1.9 trillion US support package that will be debated in congress this week. The bigger the spend, the higher global stocks and the Pound will go. 

 

Apart from the upcoming data that will drive the Pound on release in Q1, mutations of the coronavirus (which are quickly becoming the primary concern for governments and investors) could lead to instant weakness also. If scientists ever confirm that a mutation isn't covered by a current vaccine, we could be heading back to square one again. This may play a huge part in when countries decide to come out of lockdown and will obviously delay any crucial  economic activity.

 

A quick word on the vaccination side, as today EU newspaper POLITICO reported just how well the UK is doing in comparison to the EU. On current trends, the UK will have vaccinated 70% of adults by August 2021 and probably achieving herd immunity by doing so. The EU paints a completely different picture with summer 2023 for Spain & France, May 2024 for Germany and late 2027 for Italy to all hit the 70% figure. This is a big reason why economists are expecting a surge from the Pound in H2 this year. 

 

It's a very quiet week ahead for the UK on data with tomorrow's unemployment figure the only thing of note and even that won't be exciting because of furlough keeping things at bay. The US have an interest rate decision and news of President Biden's fiscal package that will undoubtedly be market movers. The EU release some nations GDP and confidence figures and also Germany's latest inflation rate which will be key. The Pound therefore looks set to remain at favourable levels this week. 

 
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