The pound fell sharply at the end of last week against a handful of currencies following reports of a new, and more mutated, variant of Covid-19. This morning, it has strengthened against the euro but is still struggling against the dollar.
The government has reintroduced mandatory mask-wearing in shops and on public transport, and UK arrivals will have to take a PCR test from Tuesday, to curb the spread of the new variant, known as Omicron.
If further measures are introduced, it could have an impact on the Bank of England’s monetary policy outlook, something that could threaten the pound’s strength.
Speaking on Friday, BoE chief economist Huw Pill reiterated the message we heard from BoE official Silvana Tenreyro that interest rates will need to rise in the near future. Again, no specifics were given as to when this might happen, but Pill added that “the ground is prepared for policy action”.
