GBP/USD: A cautious approach to lifting lockdown could dampen pound optimism – MUFG

FXStreet Team FXStreet

The pound continues to be one of the best performing currencies this year which has helped to lift cable back to within touching distance of the 1.4000-level for the first time in almost three years. However, the latest UK press reports suggest that the UK government will adopt a very cautious approach to easing restrictions which could dampen the economic recovery at least in Q2, dampening pound optimism, per MUFG Bank.

Key quotes

“According to press reports, the UK government appears to have shifted the goal posts as it now appears to be placing more emphasis on suppression as well by aiming to reduce the number of new cases to below 1000/day before significantly easing restrictions. The government’s plans for reversing restrictions will become clearer on Monday. A slower, more cautious plan for easing restrictions could dampen some of the recent optimism towards the pound.”

“We are now assuming no further stimulus will be needed from the Bank of England this year which provides a more favourable backdrop for the pound, but needless to say that remains highly dependent on a stronger UK economic recovery from Q2 onwards.”

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