Pound Sterling exchange rates were down across the board over the last week, notably against the Euro and Dollar with GBPEUR seeing lows of 1.1480 and GBPUSD being as low as 1.3660.
There a few reasons why we saw this drawdown in GBP- the first is that the “Vaccine Trade” begun in January and much of the investors in this position would have taken profits at 1.18- when we see prices move up relatively quickly in a particular currency or asset, a pullback due to profit taking is always expected and completely natural. Secondly, there has been a lot of news about the Oxford AstraZeneca vaccine not just in Europe but in the UK as well due to some cases of blood clots in individuals after taking the vaccine, rightly so this is being investigated and it is no longer being given to individuals under the age of 30- fortunately with Moderna vaccines arriving in the UK over the next few weeks this should not affect deployment in the UK but it did provide some uncertainty which of course would trigger a sell-off in the short term.
The positive news is as of Monday the UK should officially reach “Herd Immunity”, on the exact same day that the country begins to open up with non-essential retail, pubs, and most importantly (For me)- barbers opening again- I expect that this should provide some support to GBP and now everyone will be watching case numbers closely in the UK, we may see a small rise over the next few weeks, but this is the chance for the Vaccine to show it works, and if Israel is anything to go by- we are not expecting anything negative to happen.
Other positive news is that the vaccine rollout in Europe has really begun to pick up pace which is fantastic news- we have seen this reflect in the Euro against GBP and the Dollar- with EURUSD prices going from 1.17 up to 1.19 within one week- completely erasing losses from March.
One event that could potentially present a thorn in Sterling’s path is the Scottish Parliamentary elections in May- as it stands (And I feel this is unlikely to change), Pro-Independence parties are expected to have big wins in these elections which will push forward more action for Scottish independence- I feel this was inevitable and will have an effect on Sterling exchange rates, so it is worth keeping an eye on this moving forward.
As far as data releases are concerned- we have Industrial and Manufacturing Production out of the UK on Tuesday- both expected negative, but better than previous readings- inflation figures from the U.S are expected higher, and the most noteworthy event is Fed Chair Powell speaking on Wednesday evening, which is always a market mover.
If you have an FX requirement over the next week- please don’t hesitate to contact me for any information you need on the markets.