There is currently a focus on how the United Kingdom is set to handle the delta variant of the coronavirus. This comes even as the UK, a well-developed country, has most of its population already vaccinated. Investors believe that their success in dealing with and controlling the disease will have a significant impact on the Pound Sterling’s fortunes.
The COVID Delta Variant and Vaccination
Since its discovery in India last year in October, there has been a spread of the delta variation of covid-19 to more than 100 nations. It is forecasted by the World Health Organization that it will become the prevailing covid-19 strain.
While the number of Covid-19 issues in Britain has heightened since January, hospitalizations and fatalities have been on the decrease. This provides concrete evidence that vaccinations are effective. According to Bloomberg’s Vaccine Tracker, up to half of the citizens in the United Kingdom are completely vaccinated.
Investors’ Thoughts
The concern for the pound sterling is that the emergence of these more infectious covid varieties will cause policy normalization to be delayed. This may destabilize investments in nations whose central banks are regarded as more probable to raise interest rates early, such as the Bank of England.
The situation might also cause the Bank of England to forgo its economic expansion plan, which will slow down the pound’s appreciation.
Some investors’ however, think that the BOE’s expansion policy is reckless and is now at its limit. They believe that the lifting of the lockdown, a large amount of money saved by citizens to be spent, the strengthening of the housing market, and the general weakening of the dollar will pave the way for growth and cause the pounds to appreciate. Investments in the cheap value of pounds are therefore expected.
General Effect on the Pounds
According to Bloomberg, the pound sterling experienced its worst month in June in the past nine months, owing to concerns over the delta variation. The postponement of the economic opening-up also contributed to a dip in prices. Going forward, there is also a debate as to what the fate of the currency will be after the new economic opening-up date on the 19th of July. The anticipation of a broad price movement has hit a rock bottom level since 2014. Hence, currency volatility is anticipated to stay modest.
It is, however, predicted in a strategists’ survey by Bloomberg that the pound will eventually rise from its value of $1.38 on Friday to $1.42 by December.
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