Pound Sterling Rebounds As UK Government Unveils Re-Opening Plans, USD Stays Pressured

22 February 2021 | Updated: 22 February 2021

Prime Minister Boris Johnson today unveiled plans to gradually ease the lockdown measures, adding to the optimism. The cable is back above 1.40 and hitting a fresh 34-month high of 1.4052 after briefly falling to 1.3980 in early European deals on Monday.

On Monday, the UK government released a document detailing its plan to ease the coronavirus-related isolation measures. “The lockdown roadmap is divided into four phases with a minimum interval of five weeks between each step,” and one of the key steps states: “People should continue to work from home until the results of a social distancing survey are available, which, is expected to be completed by June 21,” 

Prime Minister Johnson, meanwhile, said that “we will draw up a plan of action to gently pull us out of lockdown,” with the top priority of reopening schools. The UK has gained a pioneering advantage in terms of getting covid shots, and now about 25% of the population is vaccinated with the first dose. This factor continues to support sentiment around the pound.

Reflationary trading amid optimism about the vaccine and stimulus continues to benefit the risky asset, the pound sterling, as investors ignore reports highlighting the impending Brexit risks. Markets remain focused on reflationary trading, awaiting fresh news on a potential US stimulus deal. The main event of the Pound Sterling remains the speech of British Prime Minister Johnson, in which he charted a way out of isolation.
USD Stays Pressured With a Bias to the Downside
The dollar weakened against most of its main competitors, with the Australian dollar and pound sterling soaring to new multi-year highs. The American currency fell, although the yield on US Treasuries resumed growth and ended the week at its highest level in a year.

The Federal Reserve released its semi-annual monetary policy report, which showed policymakers believe that the risks of impending bankruptcies in the country “remain significant.” Chief Jerome Powell is due to testify before Congress this week, for the first time during Biden’s administration.

Powell is due to testify before Congress on Tuesday, and his prepared remarks could be published as early as Monday. If he confirms the bank’s willingness to do more and opens the door to more bond purchases, yields could fall and the dollar may rally. While he is unlikely to go for new and imminent stimulus, Powell’s willingness to do more could provide the next upward leap for GBP/USD.

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Azeez Mustapha

Azeez Mustapha is a trading professional, currency analyst, signals strategist, and funds manager with over ten years of experience within the financial field. As a blogger and finance author, he helps investors understand complex financial concepts, improve their investing skills, and learn how to manage their money.