Pound's value falls over Easter but lowering Covid-19 infections could lead to strengthening

Mon 12 Apr 2021
Posted by: William Barns-Graham
Features

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Riots on the streets of Belfast have served as a reminder of the implications of Britain’s exit from the EU and its complexities for both trade and peace.

Frustrations over the terms of the Northern Ireland Protocol have pushed the pound lower against its major counterparts in recent days, despite continued optimism over the county’s vaccine rollout.

The success of the programme has created a fertile environment for the country’s economic recovery, though there have been some concerns that the association of the AstraZeneca jab with blood clots may dissuade some from getting vaccinated.

The UK has announced it will offer those under 30 an alternative jab.

Sterling declines

Following the Easter bank holiday weekend, Sterling declined against both the euro and the dollar.

On Tuesday the pound was valued at US$1.39 and €1.18, but it steadily declined to a low of $1.368 and €1.15 on Thursday evening.

There was a small recovery on Friday to finish the week at $1.37 and €1.154.

Stable dollar

The pound had been gaining on the US dollar for the previous two weeks, with profit-taking expected to push the rate lower.

On Thursday, the Federal Reserve (Fed) released minutes from its most recent monthly policy meeting and although no new decisions were revealed, they did suggest a rise in interest rates could come sooner than 2023.

A lack of surprises from the meeting kept the dollar relatively stable against other currencies, though the main US stock market index did reach an all-time high within hours of the release of the minutes.

Stocks reach new heights

The Dow Jones Industrial closed the week at 33,801 while the FTSE reached year-to-date highs of 6,942 on Thursday before closing the week at 6,915.

Inflation concerns were again cast aside as it was announced that “upward pressure on prices is likely to be temporary”.

Euro gains ground

The euro opened the week at US$1.174 and proceeded to regain some of the ground lost since the end of March, moving up to $1.193 on Thursday evening before closing on Friday just over $1.19.

The euro has struggled recently due to the EU’s slower vaccine rollout compared to the UK and US, as well as rising infection rates prompting fears of a ‘third wave’ of the coronavirus on the continent.

Oil subdued

Oil prices remain subdued and finished the week at $59.35 per barrel.

The week ahead

Eyes this week will be on inflation data from the UK, Europe and the US as well as coronavirus rates around the world.

Weekend data showed that UK rates of infections and deaths are at their lowest since August-September last year, which should help the pound.

Reports of a second wave of infections sweeping through India may cause a surge in dollar buying due to the US currency’s safe haven status. 

Economic data

Highlights this week include:

Today (12 April)

  • Euro zone retail sales

Tuesday

  • UK industrial production data
  • UK manufacturing production data
  • US Consumer Price Index (CPI)

Wednesday

  • German consumer price inflation data
  • Eurozone industrial production

Thursday

  • EU CPI
  • US retail sales data

Friday

  • Eurozone CPI data