Sterling (GBP) Weekly Outlook: COVID-19 Vaccination Program Underpins Sterling

The British Pound has had a fairly lackluster week but is seemingly building decent support around the low 1.3500 level which should hold again next week. With EU/UK trade talks now in the rear mirror, although regular updates of problems and friction can be expected, the near-term driver of Sterling will be the COVID-19 virus, its increased spread, and the UK government’s vaccination program. While PM Boris Johnson has had vocal critics of his handling of the pandemic so far, it is beginning to look like the government’s inoculation program is one of his better moments in power. A further positive today saw the UK approve the Moderna drug, its third COVID-19 vaccine. The government has ordered a total of 17 million doses of the new drug that should available by Spring.

The Department of Health has already vaccinated over 1.3 million people in the UK with at least one dose so far and has been set a target of 13 million by mid-February, including everyone over-80. The program so far has seen the UK have one of the highest inoculation rates, by total, across the world and with plans to increase the availability of the vaccine, the ambitious target may well be hit. This in turn will increase pressure on the government to begin relaxing the current lockdown rules, bringing a much-needed boost to the ailing UK economy. The Treasury continues to support the economy, announcing a further GBP4.6 billion in lockdown grants earlier this week, with reports also suggesting that Chancellor Rishi Sunak is also considering helping 700,000 smaller businesses excluded from the original bailout scheme.

There is little on the economic calendar next week until the monthly GDP figures on Friday, leaving the Sterling traders looking out for COVID-19 updates. As previously mentioned, GBP/USD should find support around the 1.3500 level, while the recent 1.3705 high may be difficult to overcome next week. If Sterling continues to respect support, GBP/USD may start to move again over the next few weeks.

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