23/02 – Reopening plans support sterling

Jeremy Thomson-Cook
Jeremy Thomson-Cook 23 February 2021

GBP: Reopening to start from March 8th

EUR: Confidence remains despite vaccination issues

USD: Powell to speak today at 3pm GMT


The news that the UK economy should be fully open and operational by June 21st helped lift sterling yesterday although fears remain as to the government’s ability to stick to such an ambitious timetable given the chances of challenges to the vaccine supply and the of further mutations in the virus that enable the spread within a vaccinated population.

UK jobs numbers this morning were characteristically poor with unemployment rising to its highest level in five years. With Johnson’s grand plan now out in the open, focus now shifts to the budget next week from Chancellor Sunak and extensions of both furlough and business rates relief packages up to and beyond June.

There’s a decent case for making such a decision clear now as opposed to waiting until the Budget but I’m sure there are political reasons for the delay.

Such news should allow for continued sterling strength; an extension of the furlough scheme kicks the can a little further down the road and the UK will have to deal with a profound level of business reorganisation and redundancies once support is withdrawn. For the pound’s sake we have to hope that it comes at a time wherein all other economies are making similar moves.


Despite the slowness of the vaccination effort in Europe, German business sentiment rose last month with expectations rising to the highest level since October of last year. Such a figure has managed to keep the euro from declining to dramatically in the past 24hrs as has the general weakness in USD markets.

Eurozone inflation at 10am is the most important piece of European data today.

US dollar

Federal Reserve Chair Jerome Powell speaks later today and the dollar has tipped its hand by weakening ahead of his appearance.

His speech this afternoon is a difficult one but we expect him to take the path of least resistance; urging markets to remember that any sign of the inflation monster under the bed is just a pile of clothes and an old hockey stick, transitory and not to be feared.

That may acquiesce some of the market concerns for a week or so – last night’s sell-off in some US stocks suggests investors are getting a little skittish – but anything suggesting hawkishness and rate rises from the Federal Reserve would blow a hole in risk faster than you can say ‘tantrum’; USD would spike higher with US bond yields across the board.

We don’t think Powell will throw that grenade today nor anytime soon but we have to be mindful that a communications misunderstanding from a Fed member could be enough to torpedo the current sentiment driven expansion.


In a signal of how far New Zealand has come, reports of a single case of Covid-19 has been enough to trigger some selling of the NZD overnight. Such is the recovery that the country has made the treatment the markets have given the NZD overnight is a useful guide for others as they exit their own lockdowns.

Have a great day.