11/02/2021

Sterling maintains position as top performing G10 currency of 2021


GBP

The pound has retained its position as the 2021’s top performing G10 currencies, despite fears around the impact of trade disruption caused by Brexit. Support has come from the UK’s successful vaccine rollout, the greater chances of an economic recovery as a result and last week’s Bank of England meeting where it was realised that the Bank of England will not cut interest rates into negative territory in the foreseeable future.

Yesterday saw a survey from the British Chambers of Commerce that marked Brexit disruption on 50% of British exports, and this falls in line with the sentiment that Brexit is likely to cause a longer-term drag on UK productivity and economic growth. Short term, the pound is massively buoyed by the vaccine progress but there is a feeling that this may wear off eventually and expose the negative impacts of Brexit. The divergence in the speed of vaccination progress is seeing sterling strength in the short term as the UK is far ahead of its G3 rivals, but interestingly the pound is now more vulnerable to a risk reversal.

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