I must say, the last week has felt like a year! Never have I experienced such an eventful first week of a year in my entire life. It seems 2021 did not want to ease us in and just get straight to it!

So let’s quickly run through the goings on of the last week- before we get to what we expect for the next 7 days…

  • UK Government announce another Lockdown with next review in February
  • Democrats have secured the Senate giving President Biden an easier time enacting his agenda
  • Protestors in the U.S stormed Capitol Hill
  • Moderna Vaccine approved in the UK (Delivery expected in Spring)
  • Military now assisting with vaccine rollout in the UK
  • London Mayor Sadiq Khan declared a major incident in London- 1 in every 30 Londoners now has Covid.

Not the most positive start for sure- but as they say, things have to get worse before they get better… (I have been telling myself that since March!)

The effect on Sterling exchange rates over the last week did result in prices being a little softer, lockdowns, of course, are negative for the economy, and it does seem the world is taking these current lockdowns more seriously than last year- the infection rates are very high, and many hospitals are voicing their concerns. By Friday, GBPEUR and GBPUSD managed to pick back up a little, mainly benefitting from USD sell-offs after the protests in America- we may see this continue through this week but we will need to see some positivity from the UK to back up traders buying Sterling.

To now take a macro view- every economy is now only going to rebound if we see infection rates slow down, vaccinations increase and businesses begin to open up again- so the vaccinations really are at the top of the agenda. It seems the UK will be raising their efforts on this from this week, and I will be watching with great interest to see how this transpires, both the UK and Canada have ordered the most vaccines, so now it all comes down to infrastructure and rollout- if this is done correctly, then the end of this really is near.

One thing I am watching for over the next couple weeks is if restrictions will get tougher in the UK, UK Health Secretary Matt Hancock has not ruled out lockdown rules getting tougher in the country, this could potentially include exercise being limited to one hour, support bubbles being banned, nurseries being closed and curfews being introduced- this would be negative for Sterling, but it does seem like a logical step.

Another thing I am watching is the Bank of England- talk of negative interest rates is returning to the surface and there are many speeches from BoE members this week, if any fuel is added to this fire then this is also negative for Sterling exchange rates.

We do have data releases this week (Though they don’t matter as much these days) such as UK GDP figures and trade balance- none of these are expected positive for obvious reasons so I don’t see much market reaction being there as I don’t think any trader will be pricing in anything positive.

In the short term- I am not expecting much positive movement from Sterling unless negativity is outweighed from another currency, unfortunately I see this being the rhetoric until we begin to see the pandemic calming down in the UK.