Sterling failed to hold onto early gains on Monday, as concerns over cases of a new Brazil coronavirus variant dented hopes that the UK’s swift vaccine rollout will usher a speedy economic recovery.
The pound soared as high as $1.3999 in Asian trading, after retreating from a three-year high on Friday amid inflation concerns.
In early London trading, it was 0.1 per cent higher at $1.3938 as investors took a punt on vaccination programmes lifting the British economy.
However, it settled back down to $1.3929 at midday as fresh details of the new Brazilian “variant of concern” emerged.
Six individuals across England and Scotland have tested positive for the new strain, but officials are still trying to track down one of those who tested positive for the new variant. It is thought they failed to fill in their registration card.
The Prime Minister has warned that his provisional roadmap for leaving lockdown is contingent on threats from new Covid variants being kept at bay. Scientists are concerned that some mutations may prove partially resistant to the vaccine.
The revelations have proved a tumultuous few weeks for sterling, with the pound soaring to a three-year high above $1.42 last week, before quickly collapsing back below $1.40 as investors booked their profits during end-of-the-month trading.
Sterling remained flat at 86.51p against the euro this afternoon, after falling to 87.30p on Friday.
Speedy jabs and falling cases
Figures released yesterday revealed more than 20m people across the UK have now received a first dose of the Covid-19 vaccine.
Cases were down more than 21 per cent last week, while deaths dropped by more than a third compared with the previous seven-day period.
Chancellor Rishi Sunak is set to announce an extra £1.65bn to fund the UK’s vaccination rollout as part of his spring Budget statement on Wednesday.
Sunak will also declare £5bn of additional grants to help businesses hit by pandemic lockdowns, the government said on Saturday.
Joe Tuckey, analyst at Argentex, said announcements in this year’s Budget could power major gains for sterling.
“Each year the Budget brings with it a degree of interest from currency participants. It is not often that the nuances of the content have a lasting impact on sterling,” he said. “This year we would expect the powerful dynamics driving current sterling gains to remain.
“This year, the points of interest revolve around the fact that Sunak’s second Budget comes along at a time where the emergence from the pandemic is fused with a great expectation of economic and social rebound,” he said, adding that he expects “sterling to continue to make further gains in the coming months, especially if the recent roadmap out of lockdown timeline is adhered to.”