The Pound wobbles

Hi everyone,

Sterling has taken a bit of a hit this week in what was supposed to be a quiet few days on the market. £-€ rates have incredibly seen the sharpest weekly fall since September 2020 (nearly 3%) and £-$ has dropped a clear 2-cents. We mentioned last week that April would be a tricky month for the Pound, but no-one predicted substantial losses like we have seen this week. 

It's hard to pinpoint why the weakness has come hard and fast for the £, but the how is because of € strength, which is mainly down to the recent acceleration in vaccines within the Euro-Zone. We expect this to be just a hiccup for Sterling and the comeback trail to be back on as early as next week, seeing as the UK edges closer to the herd immunity threshold and with the further relaxing of restrictions. Still, it may take some time until we see £-€1.17 & £-$1.40 mid-market levels again.

Everything is still pointing to a strong Q2 for the UK & £ though with future economic figures all expecting to be positive and the vaccine milestones continuing to be hit before others. The ECB confirmed today that Q1 was worse than initially expected and the downside risks are likely to spill into Q2. With a third-wave of Covid-19 already causing havoc within the Euro-Zone, it's probable the EU's economy won't see a 'bump' until Q3. This means the UK should have a 2-3 month lead on real recovery and therefore we should see the Pound climb to more desirable levels. 

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