Boris Johnson reinforces plans to end lockdown on July 19th
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Against the euro, the pound hit its highest level since June 24, at 1.17 cents. Meanwhile against the dollar, sterling hit $1.3798 in early deals in London, its highest since June 28.
Boris Johnson yesterday set out plans to end social and economic COVID-19 restrictions in England in two weeks’ time, a test of whether a rapid vaccine rollout offers enough protection from the highly contagious Delta variant.
The Prime Minister confirmed the Government aimed to end restrictive measures on July 19, with a final decision to be taken next week.
He said the step would eliminate formal limits on social contact, the instruction to work from home, and mandates to wear face masks.
In a note, ING strategists said: “GBP is enjoying some outperformance.
“This may be linked to Prime Minister Boris Johnson’s speech last night about fully reopening the economy and learning to live with COVID-19.
“Yet this link looks very fragile and even the Bank of England would admit that the final stage of reopening the economy will have little impact on economic activity.”
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Sterling has been one of the top-performing G10 currencies this year on account of Britain’s rapid vaccination rollout, which, analysts say has led to a quicker reopening of its economy.
However, in recent weeks those gains have evaporated as other countries catch up and as the Federal Reserve hinted an earlier than expected end to easy monetary policy, giving the dollar a boost.
Another likely reason has been the Bank of England, with governor Andrew Bailey warning against an overreaction to inflation in Britain.
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ING said: “At this stage, we would say that sterling lacks the momentum to break through a key support level in euro-sterling at 85.30 pence or push above resistance at $1.3930-40 in cable.”
Jeremy Thomson-Cook, Chief Economist at international business payments specialist Equals Money, commented: “Sterling is a little more optimistic than it was this time yesterday although the reasons for strength seem a bit tangential at the moment.
“It could easily be Johnson’s announcement yesterday around July 19 and the ability for people to return to a no-mask-non-socially distant way of living.
“It might as well be expectations for the football tomorrow.
“Sterling would be better supported if vaccine numbers edged up in the coming weeks alongside the reopening of the UK economy as current infection numbers may be enough to give some a second thought about holding the pound.”
With respect to the single European currency, Mr Thomson-Cook added: “A globally weaker dollar has been enough to allow the euro some levity although it remains soft against sterling.
“Eurozone retail sales could offer strength through today’s session but the combination of low volatility summer markets and recent comments from the European Central Bank will keep the single currency from going too far too fast.”
A decision will be taken on July 12 on whether to proceed with the lifting of lockdown a week later.
Speaking yesterday, Mr Johnson said: “We must be honest with ourselves that if we can’t reopen our society in the next few weeks, when we will be helped by the arrival of summer and by the school holidays, then we must ask ourselves: when will we be able to return to normal?”
He warned that a further delay would “run the risk of either opening up at a very difficult time when the virus has an edge” or “putting everything off to next year”.
Although the legal requirement to self-isolate will remain for people who have tested positive or been identified as a contact by NHS Test and Trace, Mr Johnson wants contacts who are fully vaccinated to be exempt and the Government will set out further details in due course.
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