Pound rally continues as cable breaks back above 1.3900

GBP continues to strengthen with GBP/USD breaking back above 1.39 and EUR/GBP falling to its lowest level since April last year.

The pound has been one of the better performing currencies of 2021 as the UK pushes ahead with its vaccination programme and after the Bank of England effectively ruled out negative interest rates in the near term at their February meeting.

EUR/GBP
The pair currently tests its lows from April 2020 which was seen 0.8671 and some technical analysts have suggested a firm break below that level could push the pair down towards 0.8500 if downside momentum were to accelerate. Of note, there are large sized options expiring at 0.8700 in EUR/GBP (546mln) at today’s 10am NY cut.

As mentioned, GBP/USD trades back above 1.3900 and looks set to test the high seen on Tuesday at 1.3952. A break above that level could see the psychological 1.4000 level come into play.

Vaccines
GBP has benefitted from the UK’s vaccination effort with almost 16mln people now given at least one dose of one of the jabs. The EU’s rollout has been less successful and yesterday there were reports that some AstraZeneca PLC (LON:AZN) vaccines in the EU were going unused amid concerns from health workers in France and Germany about side effects. If the UK keeps vaccinating at the same rate, there is hope that at least every adult who wants a vaccine may be able to have one by the summer, prompting hopes that the economy can reopen sooner rather than later and a sense of normality will return.

Bank of England policymaker Andy Haldane has recently spoken of the huge pent-up demand waiting to be released. “The recovery should be one to remember after a year to forget,” Haldane said. The Bank of England’s chief economist said we could see double digit annual growth and inflation on target. If he’s right then the GBP could still have further to run.