The pound continued to rally against the dollar on Tuesday, as optimism grew over the speed and effectiveness of the UK's coronavirus vaccine rollout.
Sterling (GBPUSD=X) rose 0.2% to $1.394, its highest level since April 2018. It has been on an upward trajectory since mid-September, when it was trading below $1.28. The pound was up 0.1% against the euro (GBPEUR=X), trading at $1.147, its highest level since April last year.
The mood music over the UK's vaccination programme is fuelling hopes of a greater and swifter rollback of the lockdown restrictions currently hobbling the UK economy. Ministers have set a target date of 8 March for reopening school buildings, but no further dates have been given for other areas. Non-essential shops and rules on outdoor meet-ups expected to be eased after schools.
UK prime minister Boris Johnson urged the public to be "optimistic but patient" in a press conference on Monday night, and that he wanted the current lockdown to be the last.
He said there was "grounds for confidence" mass vaccinations had begun to curb the spread of COVID-19 in a press conference on Monday night. The UK recorded 9,765 new confirmed infections on Monday, the first time it has fallen below 10,000 since October.
Vaccine minister Nadhim Zahawi also said the evidence was "really encouraging" on Tuesday, but said it was still too early to speculate.
Despite this, the Times reported a study comparing vaccinated and unvaccinated elderly people suggesting inoculation has contributed to lower hospitalisations and deaths. Another study reportedly shows fewer cases of asymptomatic infection among healthcare workers who have received the jab, which should reduce transmission.
Britain's nationwide lockdown since January is also likely to have played a significant role in curbing the virus' spread, though officials stress cases, hospitalisations and deaths remain high.
Meanwhile the UK government is reported to be hopeful everyone over 50 will have been offered a first dose by the end of March, rather than the publicly stated May target.
The government is also considering a so-called "test with a ticket" plan, which would see rapid coronavirus testing rather than vaccine passports used to ensure large events and crowded venues such as theatres and nightclubs are safe. Johnson said the combination of the vaccine rollout and rapid testing were being looked at for parts of the economy that remain "those bits that are the toughest nuts to crack."
The FTSE 100 (^FTSE) also continued to rise and outperform its European counterparts on Tuesday, after surging 2.5% on Monday despite the higher pound.
"The FTSE and sterling had a stonker of a day as UK assets found favour thanks largely to Britain’s successful vaccination rollout, which has handsomely boosted sentiment towards the UK economy," said Neil Wilson, chief market analyst at Markets.com.
"GBPUSD broke through 1.39 before kicking on to mark a new 3-year high overnight at 1.3950 and now looks set to take out 1.40 as expected. EURGBP slipped further towards 0.870, levels not seen since May last year."
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