While EU countries are considering the introduction of additional quarantine measures, the partial lifting of restrictions in the UK – shops, hairdressers and gyms have opened – gave the pound sterling reason to rise after falling to two-week lows.
Should you use the situation to buy the pound against the euro? AMarkets experts answered the question of Forteider magazine.
The next stage of lifting quarantine restrictions in England created excellent conditions for the implementation of deferred demand. Severe restrictions, like social distancing measures, have been in place in the UK since January. During this time, consumers have accumulated enough savings that can now be spent. In addition to the projected growth in consumer activity, statistics are also on the side of buyers of the British currency.
Published data showed that UK GDP rose 0.4% in February from the previous month, resuming growth after falling 2.2% in January amid a widespread lockdown. It is worth noting that in the absence of new lockdowns, the pace of economic activity should accelerate in the coming months, especially in light of the reopening of schools, beauty salons, fitness clubs, as well as restaurants and pubs.
According to HSBC’s forecast, UK GDP will contract by 1.9% in the 1st quarter, but will grow by 5.8% in 2021 as a whole. The advantages of buying the pound versus the euro also become apparent when looking at the rates of vaccination in the Eurozone and England. Recall that in England more than 60% of the population is vaccinated, while in the Eurozone this figure does not exceed 15%. Considering the above, we recommend holding “short” positions on the EUR / GBP pair with a target at 0.85.