It’s Freedom Day in the UK, meaning that pandemic-related restrictions are gone, but Covid-19 cases in England are now the third-highest number in the world behind only Indonesia and Brazil.
Lack of confidence in the relaxed restrictions has weighed on sterling, which meanwhile, teetered at $1.3755, its lowest in more than week, and dropped against the euro.
“The Netherlands relaxed all restrictions and saw cases soar from 500 to 10,000 per day in two weeks, and the government has had to reverse course and is now waiting nervously to see what happens to hospitalisations,” said analysts at ANZ Bank.
“The UK’s ‘freedom day’ today has some worried it could have a similar experience.”
The changes will see the reopening of venues such as nightclubs and theatres and the end of limits on the number of people meeting indoors, as well as an end to legally enforced social distancing and mask-wearing.
The pound ended last week down marginally against the euro to 85.52 pence, moving further away from 3-1/2-month highs hit earlier this week. On Monday it is holding at 86 pence. The euro is flat against the greenback at $1.18.
There have been statements from Bank of England Monetary Policy Committee members suggesting that the quantitative easing policy — asset purchasing — may be nearing its end. This has not been sufficient to prop up sterling against the dollar or the euro.
“We are getting a change in tone from some MPC members, but we are still some way off a change in policy,” said Dean Turner, economist at UBS Wealth Management, referring to the BoE’s monetary policy committee.
“As momentum switches in favour of the dollar, it will be hard for sterling to make much headway.”
Turner said the pound was more likely to appreciate against the euro, given the BOE’s more hawkish stance compared with the European Central Bank, whose recent strategy review may force it to even extend asset purchases.