22 Feb 2021
British Prime Minister Boris Johnson is set to give details about the UK’s lockdown exit, later on today, which could sustain the Sterling’s performance. The British currency retained its status as the best performing major currency of 2021 after gaining once again against its G10 peers. At the start of the week, the GBP/EUR exchange rate was being traded at 1.1572.
The Pound’s strong performance highly depends on the UK's rapid vaccination programme. Strategists noted, "We think that the UK government would err on the side of caution with regards to exiting the lockdown, and this much could disappoint the GBP bulls.” The UK has seen a drop in COVID-19 cases during the lockdown. By the end of last week, the UK had vaccinated a third of its adult population.
“Sterling continues to reap the dividends of a successful vaccine rollout and momentum is building towards a reopening of the economy – probably starting with schools on 8 March. This should be supportive of the post Brexit re-rating of UK asset markets (very observable in the UK Gilt market on Friday) and keeping GBP supported,” strategists continued to point out.
Moreover, the GBP to USD exchange rate was at 1.4009. “USD higher, equities lower; rising US yields are leaving footprints. This is going to get very interesting,” Marc-André Fongern tweeted on Monday.
Investors may be attracted to the U.S. markets due to the higher yields, boosting the value of the Dollar.