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  • The return of non-essential shops and its effect on the economy

    Published on June 18, 2021

    As the UK continues along the steps of the government’s roadmap, the nation has recently seen non-essential businesses and indoor hospitality reopen in an attempt to boost the economy. In terms of forex trading, the price movements of the British pound (GBP) can reflect a number of fundamental factors, but arguably the most important is the economic growth of the country.

    The forward trajectory of the economy is therefore heavily reliant on businesses and consumer confidence, and will influence the spending and investing of those partaking in online forex trading.

    Macroeconomic data is also important for speculating on the likely price movements of currencies, as interest, inflation and employment rates, as well as the gross domestic product (GDP) are all factors that contribute towards the strength of the economy. Again, these rates will be influenced by the sectors that have recently reopened, such as non-essential shops and hospitality, as the UK recovers from the effects of the coronavirus pandemic.

    Investors looking to take a position on the forex market will certainly be analysing the reaction and market sentiment towards the steps being taken on the government roadmap, as well as regularly considering the events plotted on an economic calendar to predict the value of relevant currency pairs.

    The non-essential retail sector

    According to the Organisation for Economic Co-operation and Development (OECD), the retail sector is a huge part of the economy, not only for the UK, but across all of the 38 countries it represents. The organisation’s data states that this sector alone accounts for on average 5% of GDP, and employs one in 12 workers. Therefore, the reopening of the retail sector was paramount in the necessary recovery of the economy.

    The impact of the coronavirus pandemic, and the implementation of lockdowns, meant that there was also a rift between businesses that were classed as essential and non-essential. Those classed as non-essential were stores that were related to:

    Luxury goods

    Home appliances

    Home furnishings

    Luggage and travel accessories

    Apparel

    Gifts and special event items

    However, as of April 2021, the UK saw the reopening of non-essential retail, including personal care premises such as hairdressers and nail salons — which was joyfully welcomed after several lockdowns. This showed promise for the recovery of the nation, with economists predicting that the rest of year will bode well for the strength of the economy — more so than previously expected — and so will generate further interest in trading in Sterling.

    This coincides with further data from the OECD, which states that the growth of the UK economy is speculated to be the fastest among the largest and richest countries. The organisation predicts that the UK economy is likely to grow by 7.2% in 2021, which has increased from its previous prediction of 5.1%.

    Delayed lifting of COVID restrictions

    Despite the fact that businesses have been able to re-open within the steps set out by the government’s roadmap, the value of the pound is still influenced by the end goal date of 21st June. This date in the roadmap was initially set to be the final lifting of all restrictions in the UK. However, there is speculation that this date will be delayed further, in order to counteract any further lockdown situations and ensure that the return to normality will be irreversible.

    As a result of this implied delay of the final stage of the roadmap, at the time of writing, the value of the pound has come under some pressure. The pound to euro (GBP/EUR) exchange rates were trading at 1.1615, which was down by 0.20%. The pound to dollar (GBP/USD) currency pair also saw a fall in value, currently trading at 1.4123, at the time of writing. 

    However, it’s not just the reopening of the economy that influences the sentiment around the currency market though, as factors such as the low rates of infection and a strong vaccination programme, will also count towards the boost in economy. Therefore, experts expect that the pound can still rise in value on the forex market, even with the uncertainty surrounding the government’s roadmap.