Sterling was able to end its multi-day losing streak on Wednesday as market sentiment improved globally. While investors were extremely worried at the beginning of this week over the rapid spike of COVID-19 Delta cases, many economists are now hopeful that the recent rise in cases “do not translate into hospitalisation rate that force a reversal of economic re-opening”. Many investors are now of the view that vaccinations will be able to sever the link between cases and hospitalisations. On this basis, countries like the UK, who have a very high vaccination rate, will be able to withstand the latest wave of infections without having to shut down their economy. While the UK has administered over 82M jabs and over 54% of the population are fully vaccinated, fears increase over countries around the world that are lagging drastically behind.
Despite investors becoming more optimistic about COVID-19, Brexit may prove to be significant hinderance to Sterling. Yesterday the UK put forward a new set of demands to redraw the post-Brexit trading arrangements it agreed with the EU for Northern Ireland. Brexit Minister Lord Frost has said he wants the EU to look on the UK’s new proposals with “fresh eyes” as he claims both sides “cannot go on as we are”. Frost went on to stress that the current deal is harming business and damaging to the “fabric” of the UK. In spite of these claims, the EU has sternly said it would not agree to renegotiate the terms of the 2019 deal. It is important to note that the government still has the option to trigger Article 16, which would allow it to suspend parts of the Brexit deal. While Lord Frost has said such an action could be justifiable, the government “have concluded that it is not the right moment to do so”.
After starting the day at 1.3605, as market conditions improved Sterling was able to capitalize. GBPUSD finally finished Wednesday trading at 1.3675.
GBPEUR also gained some upside yesterday. The pair opened at 1.1562 and closed at 1.1599. Since yesterday’s close the pair is now trading in the 1.16’s.
EURUSD creeped closer to 1.18 on Wednesday. The pair started the session at 1.1766 and was able to close at 1.1789.