Sterling nudges lower as Boris moves to confirm 19 July unlocking

Sterling nudged lower on Monday as the Prime Minister Boris Johnson moved to confirm plans to remove nearly all remaining COVID-19 restrictions in England from 19 July, despite cases currently at their highest since the end of January.

Sterling fell 0.4 per cent to $1.385 against the dollar this morning, after jumping to above $1.39 on Friday. Versus the single currency, it edged 0.3 per cent lower at 85.65 pence.

The pound is currently buying €1.168 as it moved 0.11 per cent lower.

Johnson will announce his final decision to ease lockdown measures at a news conference this afternoon.

He is expected to scrap rules on mask-wearing and social distancing and the instruction to work from home, leaving it instead up to the individual firms.

Meanwhile, analysts at Commerzbank have said that their findings suggest that Johnson’s decision to delay lockdowns last year was unsustainable.

“The later the lockdowns are imposed, the stricter and probably longer they are,” said Ulrich Leuchtmann, head of FX research at Commerzbank.

“If that were to happen the market’s optimism that the Bank of England might dare a lift-off, i.e. the first rate hike, might be shattered somewhat,” he added.

The government argues that even though cases have surged, deaths and hospitalisations remain under control. Johnson said last week that the link between cases and hospitalisations had been “severed”.

Sterling has been among the top performing G10 currencies this year following Britain’s quick vaccination rollout, which encouraged hopes for a quick economic recovery.

More than 87 per cent of adults have received at least one dose of a COVID-19 vaccine in Britain and 66 per cent have received two.

But investor confidence has been hit by a surge in COVID-19 Delta variant cases, that added to weaker-than-expected economic data in England.

Data showed last week that Britain’s post-lockdown economic rebound slowed sharply in May with gross domestic product growing by 0.8 per cent from April, much weaker than the median forecast of 1.5 per cent in a Reuters poll of economists.

“GBP bulls are finding it difficult to find motivation this morning,” said Jane Foley, head of FX strategy at Rabobank.