By Elizabeth Howcroft

LONDON (Reuters) – The pound rose on Monday as some UK lockdown measures were eased, recovering some of last week’s losses, but analysts cautioned that the boost to sterling from being ahead in the vaccine race could be short-lived as other countries catch up.

England’s shops, pubs, gyms and hairdressers reopened after three months of lockdown.

At 1427 GMT, the pound was at 86.68 pence per euro, up 0.2% on the day but still weaker than when it hit a one-year high of 84.720 this time last week.

Against the dollar, the pound was up around 0.3% at $1.3746 .

“We’ve known about April 12 for some time but there were some doubts, I think, in investors’ minds as to whether the UK would actually open for business today, and it does appear that retail is up and running, so I think that’s generated some sterling demand today,” said Neil Jones, head of FX sales at Mizuho.

But, he said, the so-called “vaccine trade” would not last, as other countries catch up with the UK in easing lockdowns over the longer term.

The UK’s vaccine roll-out – one of the fastest in the world – helped give the pound its best quarter since 2015 in the first three months of 2021.

That trend reversed last week, with sterling suffering a net 2.1% weekly loss against the euro – a move which market participants said was amplified by a squeeze of euro-pound short positions.

Speculators’ net long position on the pound versus the dollar shrank in the week to April 6, weekly futures data from CFTC showed. The market has been net bullish on the pound since early December 2020, but the latest data put levels of bullishness at their lowest since February.

Strategists at JP Morgan, who hold a short position in the pound versus the dollar, wrote in a note to clients that “winning the vaccine race” could never have provided more than a short-term boost for the pound.

“With vaccinations now fading as a driver of GBP, investor attention should turn to the sustainability of economic growth following the boom that will inevitably accompany the economic reopening,” the note said.

“And on this front we remain sceptical about whether the UK is capable of sustaining any real degree of outperformance,” JP Morgan added, citing a “structural drag” from Brexit as well as the possibility of renewed calls for a second referendum on Scottish independence creating political uncertainty.

Bank of England interest rate-setter Silvana Tenreyro said removing fiscal or monetary policy support for the economy too early after last year’s coronavirus slump could have a damaging effect on the labour market.

(Reporting by Elizabeth Howcroft, editing by Larry King, Bernadette Baum and Giles Elgood)