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Pound Stabilises; UK Vaccine Rollout Keeps Investors Bullish

LONDON, March 19 (Reuters) - The pound was steady on Friday, edging up slightly against the dollar and flat against the euro, a day after a Bank of England meeting that gave sterling traders little reason to change from their generally bullish outlook.

Sterling has gained more than 2% so far this year against the dollar and 4.3% versus the euro, which analysts say is largely due to Britain’s success in rolling out COVID-19 vaccines and relief that a last-minute Brexit trade deal was reached at the end of 2020.

The Bank of England kept its interest rates and 895 billion pound bond-buying programme unchanged, as expected.

It said that Britain’s economic recovery was gathering pace but policymakers were split over the prospects for longer-term improvement.

The pound initially slipped after the BoE meeting, but remained on track for a weekly gain against the euro. It was set for a net weekly loss of around 0.1% against the dollar.

At 0853 GMT on Friday, sterling was at $1.3950, up 0.1% on the day. Versus the euro it was little changed, at 85.475 pence per euro.

“We are unperturbed by the modest underperformance in GBP following the MPC rate decision,” wrote BofA FX strategists in a note to clients. “We are about to enter the most positive cyclical month for the pound in April as the economy begins to re-open.”

“The only near-term cloud on the horizon as we see it is developments in the vaccination roll-out process where we keep a watching brief.”

Earlier in the week, Britain said that it will see a significant reduction in the amount of COVID-19 vaccine doses available at the end of this month due to a cut in manufacturing supply.

The European Union has threatened to ban exports of COVID-19 vaccines to the UK to safeguard scarce doses for its own citizens.

The euro-sterling pair is probably being prevented from going below 85 by the UK government’s cautious pace of reopening the economy and by continued trade frictions with the EU, UBS strategists said in a note.

Britain’s record-breaking borrowing to pay for the coronavirus crisis is likely to be a little lower than forecast, after data showed the budget deficit grew by less than expected in the first two months of 2021.

UK gilt yields rose to a one-year high on Thursday, tracking gains in U.S. Treasury yields after the Federal Reserve said it expected U.S. economic growth and inflation to surge.

Reporting by Elizabeth Howcroft Editing by Peter Graff

Source: Reuters

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