- Bluestone Currency
UK Covid Roadmap, is 'Freedom Day' in Jeopardy?
Raising concern within the UK regarding the Indian Covid variant could scupper plans for ‘Freedom Day’, which could potentially cause sterling value to weaken.
The next significant step in the Governments roadmap which involved lifting further restriction on the 21st June has come into question this weekend as scientists suggest we should wait a few weeks longer.
There has been talks between UK scientists that following the latest Indian variant we’re already seeing a third Covid wave taking shape. The Government will no doubt be desperate to not deviate from this plan and there it expected to be an increase in vaccinations making sure all over 50’s have had two jabs before that date. A final decision on the 21st June will be made on the 14th June. The Environment Secretary over the weekend suggested that an extension can't be ruled out and the Prime Minister has always been clear this is the case.
A final push for vaccinations should mean that everyone has had the chance to receive the injection and with reports that only 5% of recent hospitalisations are people who have received the vaccines it’s clear the vaccination program is having the effect the Government wanted.
Positive BOE policy maker comments cause Sterling optimism
Last week sterling was the benefactor of some real optimism from Bank of England policy maker Gertjan Vlieghe who hinted that the start of next year may bring an interest rate hike in the UK. This information was well received by the markets who interpreted this as there is real optimism for the UK economy. Considering the situation we were in 18 months ago as Brexit was due to cripple the economy the idea that we may be raising rates in less than a year seems unreal. If there is more positive news for the UK in the coming weeks we could once again be finding the pound testing yearly highs once more against a few major currencies.
Uncertainty surrounds EU economic recovery
The French Government yesterday introduced further restrictions on UK travellers to France. Entry will only be granted to those with “compelling reasons” and any travellers will be required to self-isolate for 7 days. Whilst many had hoped that following last weeks easing of travel restrictions there could be some more good news to come, it looks like there could still be some wait before traveling to France is once again challenge free.
A non-related Covid story did find its way into the mainstream over the weekend as reports suggest Denmark had helped the United States to spy on European Politicians with German Chancellor Angela Merkel being the most high profile. The allegations go back to when Joe Biden was Barack Obama’s Vice President. At the time Joe Biden strenuously denied that the US were spying on European Allies however the whistleblowing from Edward Snowden has suggested that wasn’t the case. Whilst this story is likely to be one that disappears over time, it could start to cause tensions amongst nations especially when trade and national cooperation are such hot topics. You wouldn’t expect for now to see any immediate impact on the currency markets however depending on whether there are any further developments it could have an influence on sentiments moving forwards.
This week there is data from across the block with unemployment and economic data for different countries. At the moment positive and negative data readings are dictating the currency value as there is still so much uncertainty surrounding the coronavirus recovery. As the Eurozone economies continue to vaccinate and start to open up this could begin to have an effect on the euro. However, there is still a real urgency to make sure Brits can travel for holidays and spend in the struggling economies, however at the moment that progress is looking quite slow.
President Bidens $6TN budget
President Joe Biden last week revealed his $6TN budget which would focus on Infrastructure, Poverty and tackling climate change. The President’s initial plan is considered to be a starting point and the Senate and House of Representatives will now need to debate in order to come up with a compromised solution. The spending plans are thought to be the biggest for nearly half a decade and do come with some serious warnings.
After Biden already following Covid helped the population with a direct personal cheque, there are several concerns that this could really overheat the economy. Inflation levels in the US are already reaching a point where the Federal Reserve may need to act, however raising interest rates could have a detrimental effect. The US government provided one of payments for the population so they could spend, now the dollars have been spent there is no more money so it’s something of a false economy. Everyone was richer for a brief period so making economic decisions based of that brief moment could have lasting effects.
The US Dollar over the last weeks against Sterling has climbed back up to a 5 year high 1.42, interestingly this is the level just before the Brexit Referendum back in 2016. Essentially considering the disruption the UK has been through from both Brexit and now Covid, it’s hard to believe the market values the Pound against the US Dollar as before the referendum. Arguably, this means the market doesn’t at the moment have much confidence for the US Dollar.