Beyond Currency

"The success of the UK’s vaccination programme has given the country an incredible opportunity to forge a new path despite the concerns that still remain about the long-term effect of Brexit.

While it would be unfair to say that this happened more by luck than judgement, the challenges that have been put before Boris Johnson and his Cabinet would have challenged anyone. The shortcomings of certain ministers have been more than made up for by the talents of scientists and diplomats who have charted a course through Covid-19 and Brexit.

Finding a Brexit deal that was even acceptable, let alone agreeable, to a belligerent EU was a significant breakthrough, particularly when you consider the times in 2019 when the country was subjected to a hung Parliament where the tail was certainly wagging the dog.

The size of Boris Johnson’s majority in the last election gave his Party a mandate to drive through Brexit and has meant that right or wrong, he was able to manage the Pandemic to the best of his, and the Cabinet’s, abilities. It is unimaginable the chaos that would have ensued had Parliament been in the same condition this winter.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The UK loosened its lockdown restrictions on people meeting up in public yesterday as a first step on the road to a complete reopening. While this was a relatively small step it showed that the country is on the path to recovery following the complete lockdown that was ordered at the turn of the year.

The success of the vaccination programme still feels like a myth with over 30 million people having received their first jab and close to 3 million receiving their second.

The Prime Minister confirmed last evening that the country remains on track to achieve its roadmap for easing restrictions gradually with most non-essential retail outlets and hospitality venues opening on April 12th.

There will be several restrictions that will remain in place until May 19th, while the scientific community remains concerned about new variants of the virus arriving in the UK.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"Concerns over the ready availability of sufficient doses of vaccine to provide a second jab to those who want it are likely to limit the progress of both the lockdown and the economic recovery.

There has been a lull in the belligerence of the EU over vaccine exports. They have realised that the UK is possibly innocent of any underhand tactics over vaccines having been able to take a quick decision rather than commit the entire process to a series of committees.

The economic recovery from the Pandemic will take another step forward today as restrictions on individuals are relaxed and the rule of six returns. This will be the prelude to the reopening of non-essential shops in two weeks’ time. That will be the acid test for several sectors of the hospitality industry.

There is a threat to the recovery from the new strains of the virus currently affecting mainland Europe, but the fact that the UK is so far ahead of the game with regard to vaccinations it is hoped that any increase in cases will not lead to an increase in either hospitalization or fatalities.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The pound is expected to continue to hold its own against a strengthening dollar as the UK continues to reap the benefit of its vaccination programme. The country is set to see two significant easings of lockdown restrictions in the coming weeks.

First, next week the restriction on the number of people who can meet outside will be eased, then on April 12th all non-essential shops will be allowed to open.

Economically the first quarter is likely to be a washout as businesses have been unable to operate for the entire period. However, Q2 is likely to more than make up for the slowdown by producing possibly the highest month on month turnaround since records began.

The easing of tensions between the UK and EU over delivery of vaccines will provide a short-term benefit to the economy. Other than the U.S. where the level of stimulus is far higher the UK is set to outperform all its G7 partners.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"Prime Minister Boris Johnson was able to convince the EU Commission in talks yesterday that their stance over a possible export ban on Covid-19 vaccinations was in nobody’s best interests.

The tentative agreement means that the threat to supplies has been averted although it seems to be something of an uneasy truce.

Data for manufacturing output was released yesterday. It exceeded analysts’ expectations, rising to 57.9, while the data for the far larger services sector also beat predictions rising to 56.8. With both sectors well into expansion territory, the one area that may need additional support is hospitality.

It remains to be seen just how many pubs, restaurants and other venues will be in a position to reopen on April 12th and the spectre of a third wave the threat of which was acknowledged by the Prime Minister last week hangs over the sector.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"Unemployment in the UK fell to 5% in February as over 86k new jobs were created. This is the first time since the start of the Pandemic that the rate has fallen.

It is noteworthy that the Government has hardly rushed to take credit since it is well aware that the numbers will be significantly worse before any permanent improvement is seen.

The truth about the data is that very little has changed over the past month despite the Budget promising a brighter future.

The most concerning aspect of the country’s emergence for the lockdown will be the jobs market.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"It is a reaction that has taken place for almost as long as there has been unfettered FX trading but the volatility around Central Bank meetings remains as high as ever despite the outcomes becoming more and more predictable.

The Bank of England is facing a sight unknown in that there may be a need for rates to be cut into negative territory depending on two factors.

Negative rates would be a significant step into the unknown with analysts and economists likely to be divided on the effect and the time they will be necessary.

No one can say just what the reaction of the economy will be to when the lockdown is lifted and how long the pent-up demand will exist. Second, the effect on business of a sustained lockdown that may have made hundreds, even thousands no longer viable.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"Bank of England Governor Andrew Bailey, under continued pressure over a scandal that cost thousands their life savings, will speak at a Bank for International Settlements Conference this week that will also be attended by ECB President Christine Lagarde and Fed Chairman Jerome Powell.

Each is likely to be questioned over the most recent meetings of their Monetary Policy Meetings. While Bailey and Powell will have to answer questions about how they will deal with inflation, Lagarde is likely to be asked more fundamental questions about how the Eurozone can expect to recover from the pandemic. Once she has managed to answer the how, she will be pinned down over the when.

Bailey will express concern over rising unemployment figures and cite the end of the Pandemic, as the time for discussion of support for the unemployed and jobseekers.

The figures are unlikely to make pleasant reading from either the Bank or Government although there remains a high level of confidence, among Bank Officials at least, that the economy will recover sooner rather than later although there may well be a few bumps in the road along the way.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The Bank of England MPC meeting which concluded yesterday was not dissimilar in outlook to that of the FOMC eighteen hours or so earlier.

The Bank has confidence in its own actions and almost more importantly supports the stimulus delivered in the Budget.

The only cautionary note is the fact that the budget was more supportive of the economy than a package of stimulus measures designed to combat any soft patch going forward.

Price action across most financial markets showed that the majority of traders and investors had priced in no change to either official rates or the level of bond purchases.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The Health Minister Matt Hancock provided further optimism about the pace at which the UK is proceeding with its vaccination programme when he appeared at the Government Covid update last evening.

The UK is so well advanced in its provision of the first jab that over 40’s will be invited to book their appointments in the coming days.

Meanwhile, the Foreign secretary Dominic Raab made comments designed to counter concerns that the EU may withhold doses of the Pfizer jab that should be destined for the UK, due to unwarranted concerns over the AstraZeneca vaccine.

The Bank of England’s MPC concludes its meeting later this morning and it is possible that they will follow the FOMC by taking on a watching brief.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.