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Sterling rises to two-week high vs euro as BoE Governor expresses cautious optimism

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Joice Alves
·2 min read
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* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv

By Joice Alves

LONDON, March 9 (Reuters) - Sterling rose to a two-week high against the euro and also gained versus the dollar, supported by progress in Britain's speedy vaccination programme, with the Bank of England governor cautiously optimistic about the recovery.

With more than 22 million people having received the first dose of a COVID-19 vaccine in the UK, traders expect the swift inoculation programme to help the economy rebound from its biggest contraction in 300 years.

In a speech to the Resolution Foundation, a think tank, BoE Governor Andrew Bailey painted a cautiously optimistic picture for Britain's economy after the COVID pandemic and did not expect a big jump in inflation, which his chief economist and some investors see as a risk.

"The comments that BoE Governor Bailey made yesterday have made the newspaper headlines this morning and are therefore probably having an extended impact on the pound," said Jane Foley, Head of FX Strategy at Rabobank.

In early London trading, the pound hit a two-week high vs the single currency at 85.57 pence. Sterling has gained more than 4% versus the euro in 2021.

Versus the greenback, it rose 0.5% to $1.3892.

"GBP continues pushing higher versus euro, with the clear divergence in the pace of vaccination and the central bank's outlooks benefiting GBP," Chris Turner, Global Head of Markets at ING wrote in note to clients.

After suffering Europe's highest COVID death toll, in the first step back towards normality, schools in England reopened this week as part of the UK's lockdown-easing plan.

Also supporting the pound, finance minister Rishi Sunak's decision last week to extend his jobs support programme until the end of September in a budget that included measures to support economic growth through investments in infrastructure, skills and innovation.

Speculators added to their net "long" position on the pound and are the most bullish in three years, according to CFTC futures data for the week to March 2.

(Editing by Giles Elgood)