Sterling soars on vaccine rollout success and plans for exiting lockdown – Bibby's FX update

Mon 22 Feb 2021
Posted by: William Barns-Graham
Features

currency

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Confidence in Sterling has remained strong as progress in the vaccine rollout and the suppression of the winter wave of the virus has enabled the government to set outs its plans for exiting lockdown.

The Prime Minister set out the four-step strategy to returning the country to relative normality today (22 February).

Pound boosted

Last week was very positive for the pound, which rose by around 1% against both the US dollar and the euro as the UK vaccine rollout continued to compare favourably to that of the US and EU.

Sterling hit its best levels since April 2018 against the dollar at above US$1.405. It also saw its best level since last March against the euro at above €1.155.

Oil rallies

Oil rallied from to around US$58 per barrel at the start of last week to reach its highest level since last January at above $62. It has since lost some momentum to open the week just below the $60 level.

Cryptocurrency hits new heights

The recent rally for cryptocurrencies has continued with Bitcoin hitting new all-time high values of above $58,000, dragging many of the other digital ‘coins’ along with it.

Evidence of a broader acceptance of cryptos among traditional investment circles will further underpin their value as an investment opportunity, though enhanced regulation could constrain any further rises.

Precious metals

With Bitcoin more than doubling in value since the start of the year, money has been diverted away from more traditional wealth preservation investments like gold or other precious metals.

This has seen gold dip back below the US$1,800 level though it does appear to have found some demand in this price range.

Silver has maintained a $26-28 range since it reached during the GameStop frenzy at the start of the month.

Week ahead

Tomorrow’s UK employment report is expected to show a stabilisation in the jobless rate reflecting the extension of the furlough scheme in November.

However, the main focus for markets will be the testimony before Congress of the Federal Reserve (Fed) chair Jerome Powell. He is expected to give an insight into the bank’s views on speculation that inflation could increase.

Any sign of a tightening of monetary policy could spark an equity market sell-off, so a cautionary optimistic tone is to be expected to minimise unwanted reaction in markets.

Markets will also be watching for any news on President Biden’s stimulus plans, with large scale government spending expected.

Economic data  

Highlights this week include:

Today (22 February)

  • Bundesbank monthly report
  • Speeches from:
    • European Central Bank (ECB) President Lagarde
    • Federal Open Market Committee (FOMC’s) Bowman 

Tuesday        

  • UK employment report
  • Eurozone inflation report for January
  • US Fed Chair Powell testifies before Congress
  • US consumer confidence data
  • API weekly crude oil stocks

Wednesday  

  • German Q4 GDP
  • US new home sales and crude oil inventories data
  • Speech from:
    • Bank of England’s (BOE) Haldane

Thursday       

  • US Q4 GDP
  • Weekly jobless numbers, durable goods orders and pending home sales data
  • Speech from:
    • FOMC’s Bostic

Friday              

  • US trade balance figures
  • Speech from:
    • UK Monetary Policy Committee member Ramsden