Sterling takes British reopening delay in its stride

Sterling was largely unmoved on Monday by news Britain was set to delay the end of social distancing measures, as the government tries to slow a rapid rise in COVID-19 infections.

Prime Minister Boris Johnson is expected to announce later a delay of four weeks to his February roadmap, under which his government signalled all social restrictions to control the spread of the disease would be lifted “no earlier” than June 21.

Sterling, which has been one of the best performing currencies in 2021 as investors bet on a strong British economic rebound, hovered just below recent highs.

Against the dollar it dipped 0.1% to $1.4093, while the euro was 0.2% stronger versus the pound at 85.94 pence.

ING analysts said the delay was expected and that investors were more focused on economic data.

“We do not think this does too much damage to GBP, which instead will be focused on fresh macro updates on jobs and retail sales – both expected to be GBP supportive,” they wrote.

Bank of England Governor Andrew Bailey is due to speak at an event later, with investors watching for any signals on the direction of monetary policy and his views on inflation.

The BoE has taken an initial step to slow the pace of its asset purchases and investors are pricing in a first interest rate rise off record lows in late 2022.

Britain’s relatively rapid COVID-19 vaccination rollout and signs of a strong economic rebound have bolstered sterling in recent months and encouraged investors to bring forward their expectations for some limited monetary tightening.