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Pound and FTSE rally on vaccine hopes

Written by: Emma Lunn
Optimism surrounding the pace of the UK’s Covid-19 vaccination programme has led to the pound and FTSE both gaining value.

The pound is the strongest it’s been against the US dollar since April 2018, climbing above $1.39 in Monday’s trading.

The rally came hours after confirmation that the government had met its initial coronavirus vaccine target of 15 million people.

The FTSE 100 reached 6762 on Tuesday morning, the highest it’s been for almost a month.

Investors are betting that successful vaccine rollouts will allow economies to reopen, and that central banks and governments will continue to support the recovery.

Shane Balkham, chief investment officer at Beaufort Investment, said the year was likely to be characterised in two distinct parts, with the first six months being driven by the progress of vaccines around the world and the second being about confidence and economic growth returning.

“Our base case is the first half of the year being focused on the double-edged sword of restrictions and vaccinations. A successful six months would mean a more meaningful economic boost and certainty that once opened, industries and sectors would not have to close again,” he said. “The second half will see us engage more with the task of bringing economies back to their pre-Covid-19 levels. This will be a long and slow process, taking us well into 2022 and perhaps beyond for some countries.”

The pound is benefitting from better-than-expected growth figures last week, which showed that the UK has avoided a double-dip recession.

James Lynn, co-CEO and co-founder of Currensea, said: “While the exchange rate is favourable, it might seem like a good time to change back leftover travel money, or even take out foreign currency in anticipation of a holiday later this year.

“However, I would advise against this. During this turbulent time, it’s safer to keep hold of your money in your UK bank account over purchasing or exchanging and holiday money as market movements are often more marginal in reality than they appear. Once international travel is permitted this will signify the end of the Covid bump and I anticipate this will mean the pound has improved even more significantly than the level it is at today.”

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