The pound traded higher on Sunday amid hopes that the UK government will ease lockdown measures and kickstart some parts of the UK economy.
Sterling was up 0.4% against the dollar (GBPUSD=X) at $1.2409 after housing minister Robert Jenrick said the government would slowly and cautiously restart the economy ahead of a televised address from prime minister Boris Johnson Sunday evening.
The UK has been under lockdown for two months and the measures have severely damaged the economy as Johnson asked people to stay at home to stop coronavirus spreading. The Bank of England (BOE) recently said that the country’s gross domestic product (GDP) could shrink by 14% in 2020 and the UK’s independent budget watchdog, the Office for Budget Responsibility (OBR), said that the UK economy could contract by as much as 35% in the second quarter of 2020 if the current lockdown persists for three months.
“The message of staying at home now does need to be updated, we need to have a broader message because we want to slowly and cautiously restart the economy and the country,” Jenrick told Sky News.
He said the easing of the lockdown would be conditional on keeping the spread of the virus under control, and if the rate of infection begins to increase in some areas, more stringent measures could be re-introduced.
It is expected Johnson will also set out a five-tier warning system for England, ranging from “green” at level one to “red” at level five to flag the COVID-19 risk in different areas and to allow the government to increase restrictions where necessary. The UK is currently on Level Four.
The system will be administered by a Joint Biosecurity Centre, which will be responsible for detecting local spikes of COVID-19 so ministers can increase restrictions where necessary to help reduce the infection rates.