Prime Minister Johnson Backs Delay in Opening the U.K.’s Economy
Yesterday, U.K. Prime Minister Boris Johnson announced that the planned reopening of the country’s economy on June 21 would be delayed by four weeks. The delay gives time for more individuals to be fully vaccinated against COVID-19. The postponement comes as 90% of new COVID cases in the U.K. are now attributable to the highly contagious Delta strain of the disease. The reopening of the economy is now scheduled for July 19.
Great Britain’s economy is having a cool reaction to the delay. The GBP/USD was down by almost 0.3% on Tuesday, after falling yesterday by 0.02% yesterday prior to the announcement. The UK 100, on the other hand, is seeing an uptick, rising by 0.4% on Tuesday morning after notching higher on both Monday and Friday. Some of the optimism pushing the index up may be coming from the news from this morning that U.K. unemployment is down, while the number of job vacancies is on the rise.
Meanwhile, the EUR/GBP is up by 0.3% this morning. This may reflect the U.K.’s difficulties in controlling the virus in comparison to the rest of Europe. Although there are signs that Britain’s GDP may be strengthening for Q2 2021, the postponement of the reopening schedule may have a negative impact on consumer confidence.
Brexit Continues to Affect the U.K. Economy
Brexit woes may also be playing a role in the EUR/GBP Forex pair’s rise. Throughout the negotiations with Europe, Great Britain has attempted to keep the flow of goods and services open by refusing to inspect goods coming across its border with Northern Ireland. The U.K. considers this freedom of movement to be a key part of the Belfast Good Friday agreement, which ended the violent conflict between Protestants and Catholics in the region.
According to the EU, however, the lack of inspection violates the terms of the 2019 Brexit agreement. Northern Ireland has agreed to adhere to EU rules because of its shared border with Ireland, while the rest of the U.K. has opted out of these guidelines. Therefore, an inspection is necessary to reject goods that do not meet EU specifications. The complications in these talks have pushed the two regions to the edge of a trade war.
Pfizer and AstraZeneca Vaccines Work Against COVID Delta Variant
In a study released on Monday in the U.K., it was found that both the Pfizer (PFE) and AstraZeneca (AZN-L) vaccines offer significant protection against the COVID Delta strain which is sweeping the U.K. and India. Being fully vaccinated with the Pfizer vaccine kept 96% of people from being hospitalised, while the AstraZeneca vaccine kept 92% of people from being admitted to the hospital. According to experts, this is similar to their levels of protection against the Alpha strain of the virus. Pfizer stock traded down by 1.3% yesterday before the study was released, while AstraZeneca stock prices are currently up nearly 0.6% from yesterday’s close.
As the Delta variant of the virus becomes the dominant strain in the U.K., the four-week delay in reopening the economy could provide time for more people to receive the Pfizer and AstraZeneca vaccines.