Sterling on the front foot as COVID-19 dominates proceedings

Daily Currency Update

The start of the year has seen Sterling very much on the front foot versus its peers after COVID-19 related news dominated the markets. Risk appetite has been boosted in the last few days, after the World Health Organisation noted that more studies are showing that Omicron, the new variant of COVID-19, is producing milder symptoms compared to previous variants. Global stock markets were on the up, and currencies such as the pound are benefiting from investor appetite to take on more risk.

The market has also been buoyed by the UK taking a less firm stance on measures that could impede the UK economy. This differs to the Eurozone, where countries are considering partial shutdowns of the economy to impair the spread of the latest variant. Boris Johnson, UK Prime Minister, stated in a press conference yesterday, that the UK must try and 'ride out' the latest wave of Coronavirus, suggesting that the chances of harsher measures beyond the current 'Plan B' were less likely. This has helped the pound stay particularly strong versus the euro, where we were close to testing the psychological 1.20 figure yesterday.

Yesterday's UK PMI data also helped to spur on the pound, posting better than expected results. Growth was seen in all sectors including production, new orders, and employment.