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The pound has been one of the best performers amongst G10 FX with cable rising back towards 1.3550 after hitting an intra-day low of close to 1.3450 yesterday as the Bank of England (BoE) is exploring policy options while the UK vaccine roll out steps up, per MUFG Bank.

Key quotes

“The positive turnaround for the pound followed a speech yesterday from MPC member Tenreyro on the potential effectiveness of negative rates as a policy tool. She stated that the BoE may need to deliver more stimulus to the UK economy, and it’s important for officials to maintain the option of lowering rates into negative territory. The positive pound reaction appears to reflect some relief that she did not strengthen her call for the use of negative rates.”

“The UK rates market remains skeptical that the BoE will lower their key policy at their next policy meeting in February. In contrast, we have become more confident recently that the BoE will take policy action and lower rates into negative territory which poses downside risks in the coming weeks and months ahead.”

“Health Secretary Matt Hancock stated yesterday that more than 2.6 million vaccine doses have been given to almost 2.3 million people. The step-up in the pace of vaccine delivery, which has hit nearly 200k per day, is expected to be supported by the opening of mass injection hubs today. The UK is continuing to lead the way amongst major economies in delivering vaccines which could create conditions for a stronger relative economic recovery later this year.”