While the pound (and indeed a raft of currencies across the globe) have rebounded against the backdrop of a global coronavirus vaccine rollout and the promise to diminish lockdown measures in the near-term.
Of course, this may be impacted slightly by the news that up to 1.7 million vaccine doses could be delayed in the coming weeks, but it highlights how geopolitical and macroeconomic factors continue to impact on currency values across the globe.
In this post, we’ll ask how various currencies were impacted by Covid-19 last year, while considering what’s likely to happen in 2021.
A Look Back in Time – How Covid-19 Hit Global Currencies
One of the most adversely affected currencies has been the US dollar, which continues to dominate forex and serves as the world’s most prolific currency reserve.
Also, North America has returned some of the worst numbers from the perspective of coronavirus, with a staggering 29.6 million cases and 538,000 fatalities recorded as of March 18th, 2021.
With both the Trump and Biden administrations having also implemented huge stimulus packages during the previous 12 months (the latest of which totalled $1.9 trillion in terms of its total value).
These factors have combined to severely weaken the greenback, against most major currencies including the Euro and GBP. While a single dollar was worth €0.91 on March 18th, 2020, it fell as low as €0.81 by the end of last year.
The popular USD/EUR pairing is now trading at €0.83, despite the challenges facing EU member states and the impact of the coronavirus in countries such as Italy, Spain and (of course) the UK.
The USD/GBP pairing has also declined overall during the last 12 months, from a high of £0.87 in March 2020 (as Covid-19 began to hit hard in the UK) to a recent low of £0.71. Once again, it has rebounded slightly of late to reach £0.72, but it continues to trade in a low and narrow range.
What Will 2021 Have in Store for Major Currencies?
It can be argued that ongoing lockdown and quantitative easing measures have been more impactful on currencies than the coronavirus themselves, of course, while some assets have also been forced to deal with other issues during the last year.
Take the GBP and the Euro, for example, which spent much of 2020 trading in ever-depreciating ranges against the backdrop of Brexit.
The pound was the worst-affected by ongoing withdrawal agreement and trade negotiations, with this trend having persisted since the asset shelved 16% following the referendum vote announcement in 2016.
The GBP/EUR has remained relatively weak ever since, plunging as low as €1.06 during this time before mounting something of a recovery since. In fact, it has risen incrementally throughout Q1 2020, reaching €1.17 on March 17th of this year.
This suggests that the pound is strengthening while the dollar continues to weaken in the current market, while the Euro also seems to be struggling against rising Covid-19 cases and a stuttered vaccine rollout.
The Australian dollar (AUD) is another asset that appears to be strengthening as coronavirus cases remain close to zero, particularly as the underlying economy continues to deliver better-than-expected job and GDP numbers.