Pounds hits near three-year high against the Dollar

The pound reached its highest level against the US dollar since April 2018 on Thursday, continuing its strong run over the last two weeks. GBP/USD hit 1.3746 in morning trade with a few factors at play.

On Wednesday, Bank of England Governor Bailey again reiterated his stance on negative interest rates. “We have not taken any decision, in fact we’ve not actually discussed, whether or not to introduce negative rates,” Bailey said, while adding that he was uncertain how much it would help the economy.

VACCINES
Further supporting the pound has been the UK’s rollout of the COVID-19 vaccines which has happened at a quicker pace than most neighbouring countries. The UK has benefitted from rapid approval of the various vaccines and supply has been relatively stable. There were some fears that a factory producing supplies of the Oxford/AstraZeneca PLC (LON:AZN) vaccines in Wales could flood due to Storm Christoph but local emergency services prevented any serious disruption. Wockhardt Ltd (NS:WCKH), the company that produces the vaccine at the facility confirmed the site was operating as normal.

German investment bank Berenberg are optimistic about the UK vaccination programme, saying that if the country were to maintain the average pace of daily vaccinations of the past week, the UK could reach a vaccination rate of 60% by June this year, a figure where the rate of infection would slow, and the UK would be close to herd immunity.

Infection rates also appear to be slowing, albeit at a snail’s pace. Imperial College London professor Paul Elliott told the BBC that the current R rate was around 1. “We’re seeing this levelling off, it’s not going up, but we’re not seeing the decline that we really need to see,” Elliott said. Meanwhile, the number of people testing positive for the virus over the last seven days is down over 20% from the week before.

BREXIT
Finally, the avoidance of a so-called “hard Brexit” has also lifted the pound. After the agreement reached between the UK and the EU towards the tail end of last year, investors have some certainty about the trading relationship for the first time in years even if there have been teething problems since the introduction of the new trading arrangement. Today’s report from the Confederation of British Industry showed a large number of manufacturers were worried about supply chain disruption said that border challenges and customs-related delays arising from Brexit appeared to be playing a role.