The Pound Marches On
Sterling continues its outperformance after a very positive session on the market yesterday. Gains were extended across the board after an interesting BoE conference on the UK's economy. A unanimous decision to leave interest rates and quantitative easing as they are was good news for the £. There was also clear indication that negative interest rates were not on the agenda for at least 6-months and that the economy has weathered the pandemic better than anticipated.
After weeks of not being able to maintain trading over £-€1.13 mid-market, the Pound has jumped from 1.1310 to 1.1420 against the Euro in 24-hours. The main reason for the hike was that negative interest rates are being seen as more of an insurance policy to the BoE instead of part of the plan. There was also welcoming news that GDP in Q4 last year, turned out much stronger than the Bank anticipated.
Furthermore, the Bank revealed economic growth is projected to recover rapidly towards pre-covid levels in the second half of the year, because of the UK's successful vaccination programme. This is something we have been talking about since the start of the vaccine rollout, so no surprise to hear the comments, but traders liked the narrative nonetheless. The developments have provided some further underpinning to the Pounds 2021 rally and it continues to top the G10 table.