The pound tapped a level not seen in nearly three years, as investors grew optimistic about the possibility of loosening restrictions and the country’s COVID-19 vaccine rollout pace.
was last up 0.4% to $1.4032, a level not seen since March 2018. That move was also in step with gains for the Norwegian krone
and other currencies against the U.S. dollar.
“The run for sterling towards the $1.40 mark against the dollar reflects, in part, optimism about what a rapid vaccine rollout would mean for reopening in the U.K., setting quite high expectations ahead of [Prime Minister] Boris Johnson’s statement on the easing of restrictions on Monday,” said AJ Bell investment director Russ Mould, in a note to clients.
U.K. infections have been falling steadily and are currently at the lowest rate since October 2020.
Nearly 25% of its population has had one dose of the COVID-19 vaccine, which is the highest rate in Europe.
Investors were absorbing a batch of U.K. data, which kicked off with the worst fall in retail sales since April, slumping by 8.2% in December. That data coincided with a strict lockdown in the country, which closed all but essential shops.
There was a bit of good news. Purchasing managers index data from IHS Markit showed the flash U.K. Composite Output Index reached a two-month high of 49.8 from 41.2 in January.
“The U.K. economy showed welcome signs of steadying in February after the severe slump seen in January, albeit with business activity remaining sharply lower than late-last year due mainly to the continuing national lockdown,” said Chris Williamson, chief business economist at IHS Markit.
Elsewhere, the FTSE 100
rose 0.2%, lagging gains seen across other European indexes, partly due to the strength of the pound. As the index comprises many multinational companies that derive earnings from overseas, a strong pound can make those goods less competitive. The smaller-cap FTSE 250
which is more domestically focused, rose 0.5%.
Shares of NatWest
climbed 4.3% after the bank said it would start a phased withdrawal from the Republic of Ireland via its Ulster Bank. NatWest reported a drop in operating pretax profit and swung to a fourth-quarter pretax loss, but beat market expectations. The bank also said it would resume dividend payments.
“The winding down of Ulster Bank represents the most radical change on the Irish banking landscape since the 2008 financial crisis. The bank has been burdened with a big book of distressed mortgage loans. It’s also struggled in an era of ultralow interest rates with net interest margins squeezed and little end in sight,” said Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown, in a note to clients.
Shares of Irish-based AIB
shot up 7%. NatWest said it has agreed to a memorandum of understanding with AIB for the sale of a €4 billion ($4.84 billion) portfolio of performing commercial loans, and the transfer of staff assigned to this loan book. Bank of Ireland
shares rose 4%.