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Sterling gets vaccine boost to rise against euro and dollar

27 Jan 2021 / 17:56 H.

    * 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, Jan 27 (Reuters) - Sterling edged above $1.37 on Wednesday ahead of comments from Federal Reserve Chair Jerome Powell, while Britain's COVID-19 vaccine rollout also offered support to the pound.

    Expectations of a large U.S. fiscal stimulus package has fuelled risk sentiment in markets in recent weeks, benefiting sterling and market participants are expecting Powell to renew a commitment to ultra-easy policy.

    Britain's successful initial vaccine rollout has also helped the pound, although its death toll from the coronavirus pandemic passed 100,000 on Tuesday.

    Geoffrey Yu, senior EMEA market strategist at BNY Mellon, said "the general theme of UK doing well with vaccinations is playing a role" in lifting the pound, which is "not expensive and not over-owned yet".

    "It's FOMC today so the adjustment in dollar positions may be playing a role as well," he added.

    Sterling was up 0.05% against the dollar at $1.3742 at 0948 GMT, not far off a May 2018 high of $1.3759 touched earlier .

    Versus the euro, it was up 0.3% at 88.26 pence, a fresh eight-month high against the single market currency.

    Analysts attributed the pound's gains against the euro to a slower COVID-19 vaccine rollout in the European Union than in Britain.

    "The euro is clearly being undermined by ongoing concerns over vaccine rollout speed and supply," Yu said.

    As Britain left the bloc in December, the City of London said the capital's loss of some financial business due to Brexit has not been catastrophic and it will thrive even if the European Union "irrationally" blocks access. (Editing by Alexander Smith)

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