The approval of the COVID-19 vaccine on 2nd December 2020 feels like the distant past, as now almost 33 million people in the United Kingdom have received at least one dose of the vaccine. This impressive figure, paired with the successful gradual relaxation of lockdown regulations in the UK, have contributed to the country’s progressive growth of the economy; a factor which has a direct impact upon forex trading and the value of the pound.
Since the forex market is highly volatile and is influenced closely by political, and macroeconomic factors, the COVID-19 vaccine has affected the value of the pound significantly. In this article, we will uncover the recent effects that the vaccine has had upon the value of the pound, to see how it is faring now that the country begins to return to normality.
A promising start to 2021
Earlier this year, the pound experienced a dramatic increase of $1.39 against the US dollar (USD), as the vaccination programme began to take its course, supporting the UK’s economic recovery. In March, the pound reached $1.40, which is the highest recorded level in nearly three years. Based on these figures, experts made an initial prediction that the pound could reach $1.50 by the end of 2021, if the vaccination programme continues to progress.
This increase in value could also be attributed to the UK obtaining a Brexit deal at the end of 2020, which caused the pound to rise in value against the euro (EUR) by nearly 6%, increasing investor’s confidence in the currency.
Vaccine rollout concerns
At the time of writing, the pound has seen a depreciation, caused by the vaccine news which has voiced concerns about the success of the rollout. The pound has fallen against many of the major currencies, including the EUR and USD. However, the UK is still on track to experience significant economic recovery, as the retail and hospitality sector has begun to return to business as usual.
This fall in value is likely to have been caused by concerns regarding the AstraZeneca plant, as it is based in India, where a new strain of the virus has been detected. It is also due to experts linking the Oxford vaccine with the detection of blood clots in some of the individuals who have been immunised.
The pound’s fall in value is a reflection of the concern that these factors will reduce the momentum of the coronavirus vaccine rollout and subsequently, the resumption of activity in the UK’s economy. The government released data which shows that the vaccination programme had lost traction, at the time of writing, with the number of daily doses administered per day falling from March’s levels of 500,000 to just 116,000. This announcement saw the pound’s value fall in quick succession.
The pound to dollar (GBP/USD) pair has now fallen to $1.3725, whilst the pound to euro (GBP/EUR) currently sits at €1.1542. Although the pound has fallen from the record high that it experienced at the start of the year, it still remains 3.21% higher than the euro and 0.53% higher than the US dollar.
Like most journeys, the UK’s navigation of the coronavirus vaccine rollout has seen it encounter some speed bumps, however, economists still believe that there is significant reason to be hopeful, with regards to the value of the pound. The pound should still continue to recover throughout 2021, as the UK government’s roadmap for the easing of lockdown is underway and restrictions continue to be lifted. Furthermore, as other countries within the northern hemisphere join the UK in easing their lockdowns, the value of the pound should recover further.