So far everything is going to plan with Sterling exchange rates; we have seen GBPEUR reach 1.14 and GBPUSD reach above 1.37 over the last week- solely down to the UK’s vaccine rollout in comparison to Europe & America. The exchange rates were also pushed higher following comments from the Bank of England stating that negative interest rates could take at least 6 months to be implemented- and over that period they would expect the UK to be in economic recovery, so would probably not be needed by then.
At this point I feel we can (for now) discount the idea of negative interest rates in the UK- and with the vaccine rollout going the way it is, and after numerous tests on new strains showing the vaccine is still effective, we can look at economic recovery to be the next step for Sterling- so to me, we still have room for strength on the horizon.
1.14 for GBPEUR exchange rates was my first target before reassessment- and after looking at the markets and outlooks for the UK & EU, I think 1.17-1.18 is a reasonable next big target for GBPEUR to reach- however this will now come down to when the UK begins to reopen its economy and the rate of unemployment after furlough- which will probably be the biggest factor.
We are now beginning to see a lot of news about the potential reopening of the UK economy- the Government has suggested March could be when schools go back, but so far we have heard nothing else- there are talks of hospitality opening in April/May- but it seems the Government does not want to rush any reopening (Understandably) while the vaccine rollout continues. Cases in the UK are falling, in January we were seeing 50-60k new cases on a daily basis, and we are now seeing around 18-20k cases per day, so this has taken a dramatic turn (for the better). I am sure by the end of this month, we should be in a much better position to look at next steps for the UK to begin coming out of Lockdown- and hopefully, never have to return to it!
Economic data is still on the cards as always, but it is being discounted for the most part as no figures are really a true representation of the countries economics- this will only really be of interest when the economy begins to reopen globally. Fed Chair Powell will be speaking on Wednesday evening- which could be volatile for the U.S Dollar- and we have UK GDP, trade balance and manufacturing and industrial production data on Thursday- but apart from media spin- I do not see Sterling being affected much by it, it is understandable that the UK would be underperforming at this stage.