The verdict many analysts feared for has become a reality: The UK will have to wait one month longer than originally planned before celebrating its ‘Freedom Day’. The complete end of lockdown was looking increasingly unlikely over the past few weeks, given the sharp rises in Covid-19 rates. It’s also becoming increasingly clear that hospitalisations are starting to creep up once more.
The pound’s reaction to the announcement was rather muted, with a lot of the price action already digested by the markets before the news hit the wires.
Market participants’ eyes will now be turning to further data releases this week. Positive surprises in today’s employment data would support the thesis of a strong UK economic recovery, and pave the way for sterling gains. The more important data point will come out Wednesday, in the form of the consumer price index (inflation figures). Analysts are expecting a year-on-year increase of 1.8%, up from 1.5% previously.
This would be a continuation of last month’s increase and a closer push towards the Bank of England’s mandated target of 2%. The longer these pressures persist, the more the narratives around exiting the quantitative easing programme will start to take hold. This could be very GBP positive, especially if the UK’s banking authority moves sooner than its peers.
For now though, the pound is remaining rangebound against its major rivals.
Have a great day,
Thomas De Caluwé, senior relationship manager