Sterling climbs towards $1.41 as PM sets roadmap to easing lockdown

By Joice Alves

LONDON (Reuters) – Sterling edged higher on Tuesday against both the dollar and the euro after Prime Minister Boris Johnson set out a schedule for easing lockdown, while British finance minister Rishi Sunak added that more job support will be unveiled next week.

The pound strengthened almost 3% in February against the dollar as traders expect that Britain’s speedy vaccine roll out will help its economy rebound from the biggest contraction in 300 years.

Johnson set out a phased plan on Monday to end England’s COVID-19 lockdown, with schools returning on March 8 when only minimal socialising outdoors would be allowed.

The so-called roadmap would then pass through four stages, with the final step, when most restrictions would be lifted, not starting until June 21 at the earliest.

In early London trade, sterling rose to $1.4098 versus the dollar, its highest level since April 2018. It was up 0.3% at $1.4080 at 0904 GMT

Versus the euro, it also edged 0.1% higher at 86.32 pence, its highest level since March 5, 2020.

“Sterling continues to trade firm on the vaccine label and associated easing of lockdown expectations opening the doors to recovery,” said Neil Jones, Head of FX Sales at Mizuho Bank.

“My sense is the stage is set for $1.45”.

Sunak said he would set out more details of job support measures in his budget next week, after official figures showed unemployment had risen to its highest since early 2016.

“The extended roadmap puts increased pressure upon the Chancellor into next week’s budget, employment support will surely have to extend beyond the current April end date,” said Jeremy Stretch, Head of G10 FX Strategy at CIBC Capital Markets.

Stretch said that even if at this point cable looks increasingly overbought, “we can expect a test of $1.4095-$1.4100, and above there $1.4145-$1.4155”.

(Editing by William Maclean)