In the absence of notable economic data or comments from monetary policymakers in the UK yesterday, investors were focused on the race between the vaccine rollout and the spreading Covid-19 virus. Having slipped lower against the dollar on Wednesday – when the UK recorded its biggest daily death figure since the start of the pandemic – the pound was propelled to within touching distance of the 1.37 barrier on Thursday. The pair was helped on its way by reports that the Covid-19 growth rate is slowing in the UK, and the number of infections is starting to level off in certain areas.
Professor Neil Ferguson – whose modelling led to the first lockdown in March – told reporters that in some regions there is a “sign of plateauing” in infections and hospital admissions. His comments followed Prime Minister Boris Johnson’s claim that the national lockdown measures were “starting to show signs of some effect”.
Biden Unveils Economic Relief Package
President-elect Joe Biden unveiled a $1.9tn (£1.4tn) stimulus package overnight that is designed to jump-start the Covid-19-sapped US economy. During last year’s election campaign, Mr Biden campaigned on a promise to take the pandemic more seriously than President Trump. The ambitious, wide-ranging plan aims to put this promise into action by pumping resources into vaccine and testing efforts ($160bn) and the economic recovery. In a speech from his hometown of Wilmington, Delaware, he said: “There’s no time to waste. We have to act, and we have to act now”. The much-anticipated fiscal stimulus package has weighed on the safe-haven dollar so far in 2021, due to its power to boost economic growth and stock markets.
Earlier in the day, Federal Reserve Chair Jerome Powell said it is too early for the central bank to consider changing its monthly bond purchases – which currently stands at $120bn in government securities each month – because the domestic economy remains far from its inflation and employment goals. Mr Powell cautioned: “A lesson of the Global Financial Crisis is be careful not to exit too early, and by the way try not to talk about exit all the time…because the markets are listening.”
Looking Ahead
The economic calendar is bursting at the seams on both sides of the Atlantic today. The latest Gross Domestic Product reading is the most eagerly awaited release from the UK economy, closely followed by Manufacturing and Industrial Production figures. An even busier day in the US throws up several influential releases for the dollar: Retail Sales Control Group, Retail Sales, and the Michigan Consumer Sentiment Index.
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