Yesterday, the pound fell steadily across the board against most major currencies as Prime minister Boris Johnson admitted that “restrictions will be tightened” in the UK. The fear of a pending lockdown was enough to knock the wind out of a previously Brexit-deal buoyant sterling, pushing the pound down some 1.15% against the euro and 1.20% versus the dollar. Needless to say, sterling has opened lower again this morning after the markets fears were confirmed, with a third national lockdown now in effect – so far for an unstated duration.
With the Brexit focus now shifted for sterling, economists are back to looking at hard data to determine the next moves of the Bank of England with regards to cutting interest rates further than the 0.10% mark – even rumours of this has been enough to knock sterling by a percent or more in the past. The economic impacts on full lockdowns are extremely damaging to the UK, with most of its economy vested in service led industries that require consumers to be able to move freely – the closure of schools and other educational facilities also hasn’t helped matters. If the BoE finds the economic evidence means more rate cutting, or even negative interest rates – things could get very messy for the pound in the short term.
From here, the race to vaccinate takes centre stage; if the UK can immunise the 2 million people a week it seeks to, it will fast outpace the rest of Europe, likely giving sterling – and the country – the lift it needs to have a more prosperous 2021.
Have a good day.
Joshua Haden-Jones, Senior Relationship Manager.
Whilst every effort is made to ensure the information published here is accurate, you should confirm the latest exchange rates with WorldFirst prior to making a decision. The information published is general in nature only and does not consider your personal objectives, financial situation or particular needs. Full disclaimer available here.
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