The Pound has been whipped around by positive Covid-19 vaccine progress and conflicting Brexit reports.
The UK medical regulator has confirmed the covid-19 vaccine from Pfizer - which is 95% effective – is safe to use and therefore will be rolled out in the UK from next week with higher-risk individuals being vaccinated first. This means the UK will be the first country in the world to begin mass Covid-19 vaccinations, which should speed up the UK’s return to normal ahead of its peers and has therefore boosted Sterling.
The Pound had already moved higher overnight, hitting a 3-mth high against the Dollar, following a report from Times Radio that Brexit negotiations had reached the ‘tunnel stage’, which is an expected sign a deal would be struck. However, Sterling has been sent lower this morning after the EU’s chief negotiator cast doubt on the progress of the talks. Michel Barnier told 27 national envoys to Brussels that a deal “hangs in the balance” with differences still remaining on the same key issues (fisheries, governance and level playing field). It remains to be seen, however, how much of this is just some form of political theatre and how much is reality. The market has been heavily pricing a deal into the Pound and therefore it’s not a surprise Sterling would fall slightly on this negative headline. It seems likely we’ll get some further news on Brexit progress (or not) towards the end of this week and negotiations may even continue over the weekend. Watch this space.
In other news, the appeal of safe-haven assets, such as the US dollar, has waned as investors’ risk appetites return. Investors have been given a reason to be optimistic due to hints of more stimulus from the Federal Reserve, signs of progress towards more fiscal stimulus in the US, suppressions in Covid case numbers across Europe and positive vaccine news. It remains to be seen, however, how long-lasting the impacts of this pandemic will be on the major world economies and the impact of the more recent lockdowns.
As a result, the GBP/USD has lost a cent from the 3-mth highs seen overnight. The GBP/EUR is down 1-cent from yesterday’s high and now trades at a 3-week low. The EUR/USD is flying high, having broken the 1.20 level overnight, and trades at the highest levels since April 2018.