17/05/2021

Market report: High hopes for the pound as lockdown eases


GBP

The pound is set for a busy week, as the release of key data coincides with further the easing of lockdown. 

This is on top of last week’s Bank of England meeting where GDP growth forecasts were upgraded, a position now being cemented elsewhere. Economists surveyed by Bloomberg also upped their 2021 growth forecasts to 6%, the largest mark up since 1973. This puts the UK at the forefront of economic recovery among major European nations.

The anticipated rebound is likely to be directly fueled by the steady exit from restrictions, made possible by the vaccine rollout. However, concern remains around the Indian variant taking hold in parts of England. Some scientists worry the variant and latest loosening of restrictions are a dangerous combination and are advising against further easing. 
Data-wise, all eyes are on this week’s release of inflation, employment and retail data. The general rule of thumb is that if expectations are beat the pound will gain, whilst a miss could see declines. Most economists do think significant price pressures are building, but they’re linked to the reopening of the economy and not anything more deep rooted.

With the reopening in April, and the next phase today, there is a risk that a rebound in demand puts more upward pressure on prices than we currently expect. It is also worth remembering that unusually large releases in the data may be more due to the comparison with the sharp declines this time last year.

Key announcements

None


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