- Posted by currencies in Bank of England, Brexit, coronavirus, Dollar, EUR, Fed, GBP, No Deal, Prime Minister, Sterling, UK, Uncategorised
- January 27, 2021
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Sterling edged above $1.37 ahead of comments from Federal Reserve Chair Jerome Powell, while Britain’s COVID-19 vaccine rollout also offered support to the pound.
Expectations of a large U.S. fiscal stimulus package has fuelled risk sentiment in markets in recent weeks, benefiting sterling and market participants are expecting Powell to renew a commitment to ultra-easy policy.
Britain’s successful initial vaccine rollout has also helped the pound, although its death toll from the coronavirus pandemic passed 100,000 on Tuesday.
Geoffrey Yu, senior EMEA market strategist at BNY Mellon, said “the general theme of UK doing well with vaccinations is playing a role” in lifting the pound, which is “not expensive and not over-owned yet”.
Analysts attributed the pound’s gains against the euro to a slower COVID-19 vaccine rollout in the European Union than in Britain.
As Britain left the bloc in December, the City of London said the capital’s loss of some financial business due to Brexit has not been catastrophic and it will thrive even if the European Union “irrationally” blocks access.
The Federal Reserve concludes its first policy meeting of 2021 later today, and traders will be looking to Chairman Jerome Powell’s comments as he is widely expected to renew a commitment to the current ultra-easy policy.
We suspect the Fed will retain a cautiously optimistic tone at the press conference while seeking to downplay the prospect of any meaningful change in Fed policy anytime soon.
That said, the bank is increasingly confident that the U.S. economy can grow 5% this year, and that is before the prospect of the new administration’s $3 trillion energy and infrastructure plan.
Progress on the U.S. stimulus front is also seen as key in influencing the movement of the greenback. Senate Majority Leader Chuck Schumer said Democrats may try to pass much of the President’s $1.9 trillion spending package with a majority vote, but it is not clear if they have the numbers to override Republican objections.