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Market Update

• Posted by currencies in Bank of England, coronavirus, Dollar, Economy, EUR, GBP, Prime Minister, Sterling, UK, Uncategorised
• January 5, 2021
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Britain began its third COVID-19 lockdown with citizens under orders to stay at home and the government calling for one last major national effort to contain the virus before mass vaccinations turn the tide.

Prime Minister Boris Johnson announced the lockdown late on Monday saying the highly contagious new coronavirus variant first identified in Britain was spreading so fast it risked overwhelming the National Health Service (NHS) within 21 days.

In England alone, some 27,000 people are in hospital with COVID, a number 40 percent higher than during the first peak of infections in April.

The British pound steadied but held well below a more than 2-1/2 year high of $1.37 hit in the previous session as a new lockdown deflated post Brexit-deal optimism.

The successful conclusion of the Brexit talks offered just a momentary breather with the pound back into the dumps after Johnson ordered a third economically disastrous national lockdown for England.

The expected hit on the economy heaped up expectations on the Bank of England to announce more policy easing.

Money markets now expect the central bank to cut benchmark interest rates as early as May compared with an August estimate just after the Brexit deal was struck.

The pound had strengthened against both the dollar and euro after the Dec. 24 Brexit trade deal, which set rules for fishing, agriculture and other industries.

Despite the pound’s gains in recent days, market participants are not bullish on the currency’s prospects. Net long bets on the pound against the U.S. dollar are a fraction of what they were at their 2020 highs.