London RationalFX

RationalFX: GBP’s expectations dampened by covid cases

RationalFX: This week is set to be dominated by the easing of restrictions in England.

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Despite the apparent good news for the economy with greater parts being unlocked, fear has returned to the market and dampened the enthusiasm for the pound. We learnt last week that the double-vaccinated Health Secretary Sajid Javid is having to isolate after testing positive. This highlighted the fragility of the recovery process and the continuing prevalence of the disease. Despite the inoculation programme and the opening up of the economy, many may still be reluctant to return to normal social and consumption habits.

This comes off the back of recent hawkish sentiment surrounding the future policy plans of the Bank of England. Members Ramsden and Saunders have both shifted to hawkish stances following recent inflation data. This week we see member Broadbent and incoming member Catherine Mann giving speeches and the market will be keen to hear for clues on the outlook for interest rate and easing polices. The outlook really hinges on whether rate setters see above-target inflation as more than just transitory and a long term trend.

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