London RationalFX

RationalFX : UK’s vaccine rollout keeps sterling supported

RationalFX : Pound Sterling has risen against the dollar for four months in a row for the first time since 2012, and forecasters expect this to continue as the vaccination program continues to step and boost the chances of an economic rebound.

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This confidence is not driven by sentiment alone, around 9 million people have been inoculated so far and this confirms that the UK’s rollout is way ahead of the U.S. and European efforts.

This has led markets to push back expectations for a UK interest rate cut to 2022, with the policymakers publishing responses to a consultation on negative rates at Thursday’s meeting. It is not just the rapid pace of vaccine rollout that is fuelling the expected rebound in GDP, the proportion of national income that is saved is also very high and this should see increased spending at the end of lockdown. The current flattening of the infection curve may be evidence that the vaccination program is starting to have an effect, and hopes are picking up that there is an end in sight to the perpetual cycle of damaging lockdowns.

Economic calendar

10:00 – EUR- Gross Domestic Product (QoQ) (Q4); expected to decrease to -1.2% from previous 12.5%

10:00 – EUR- Gross Domestic Product (YoY) (Q4); expected to decrease to -5.4% from previous -4.3%

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