Pound rockets as UK vaccine programme fuels hopes for rapid economic recovery

Lockdown: Plans suggest ‘rapid reopening of economy’ says expert

The roll-out has fuelled hopes of a faster-than-expected economic recovery which has been reflected in a 0.3 percent rise in sterling to 86.55p against the euro, its highest since March 6 2020. The pound has now risen more than 2 percent against the euro this month as the UK's aggressive vaccine strategy lifted expectations its economy will bounce back much more quickly than those of other European nations.

The pound is benefiting from its vaccine currency status

Neil Jones

Against the dollar, sterling also climbed this week above $1.39 for the first time since April 2018 and reached 0.6 percent higher today at $1.3946.

A total of 15.6 million people have received their first dose of the Covid-19 vaccine so far, the fastest rollout per capita of any large country.

And Neil Jones, head of foreign exchange sales at Mizuho Bank, said sterling was benefiting from the fact that the currency market is already looking at a "post-Covid world".

He said: "The pound is benefiting from its vaccine currency status.

"Expectations for a more rapid economic recovery are kicking into play".

Boris Johnson

Britain's vaccine programme has given the UK economy a shot in the arm (Image: PA)

Boris Johnson is planning a staged exit from England's third national lockdown, which began on January 5 and hopes to get the battered economy returning to work over the next five months.

Adding to the upbeat mood, a study found lockdown restrictions have helped reduce coronavirus infections, even if the prevalence of cases remains high.

Amid the improved outlook for the economy, sterling has proved to be the most resilient G10 currency versus the US dollar, according to ING strategists.

ING told clients: "It is a matter of time when GBP/USD breaks above the 1.40 level."

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Covid vaccine

Analysts predict Britain's economy will benefit from its vaccine programme (Image: PA)

Covid vaccine

Britain's Covid vaccine roll-out has put it ahead of other European nations (Image: PA)

Hopes of a swift recovery come as the Institute for Public Policy Research (IPPR) thinktank called on Chancellor Rishi Sunak to "boost it like Biden" as researchers calculated that £190 billion is needed to get the UK economy back on track.

This is four times as much as Mr Sunak has committed so far and a figure which matches the ambition of US President Joe Biden's new administration, according to the think tank.

The IPPR's Centre for Economic Justice warned failure to deliver this risks the UK economy falling into a "stagnation trap" with about half the rate of economic recovery.

It found the economic boost so far announced by Mr Sunak for the fiscal year 2021/22 is worth about 2 percent of the value of the entire UK economy prior to the pandemic.

But a recovery plan worth £190 billion - equivalent to around 8.6 percent of the value of the economy - would deliver a faster recovery and halve the number of job losses.

This would be similar to the scale of the $1.9 trillion stimulus package planned by the Biden administration, which is equivalent to 8.9 percent of the value of the US economy.

The report said the UK stimulus should be focused on supporting businesses, workers and households hardest hit by the pandemic, restoring public services and helping the growth of sustainable industries and jobs.

Carsten Jung, the IPPR's senior economist and lead author of the report, urged the Chancellor to use next month's budget to provide "bold support" for the economy.

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Rishi Sunak

Rishi Sunak will deliver his budget on March 3 (Image: PA)

He said: "All in all, the risk of doing too little far outweighs the risk of doing too much.

"Joe Biden has understood this. Rishi Sunak should follow his lead."

George Dibb, head of IPPR's Centre for Economic Justice, said: "We estimate that an ambition similar to that of the US would be needed to get our own economy back on track.

"Otherwise we will face years of unnecessary economic pain, with fewer jobs, less investment and a slower recovery for everyone.

"It's time for the UK to boost it like Biden."

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