With over 15 million people having now received their first of two Covid-19 jabs, there appears to be a rising sense of optimism in the UK economy. This has resulted in the pound hitting its highest level against the dollar in three years.
If you were to head to the foreign exchange right now, one pound would get you 1.39 dollars. This is not only a welcome resurgence following the 5-year low of 1 to 1.15 in March last year, it is also well above the pre-pandemic level of 1.3 dollars to the pound.
With the UK economy thrown back into full lockdown just before Christmas, it was a bleak end to a year which saw the world’s sixth largest economy contract by 3.5%, the worst amongst the world’s most developed countries.
The efficient rollout of the Covid vaccine is therefore a welcome relief. The hope is that as more and more people get vaccinated, the spread of the virus will slow dramatically, thus allowing the country to end the lockdown and reinvigorate the ailing economy.
Q1. What is likely to have caused the appreciation of the pound against the dollar?
Q2. Analyse two impacts that an appreciating currency will have on an economy.
Q3. With reference to the article above, discuss the externalities associated with Covid-19 vaccinations.
Q4. Discuss the possible reasons why the UK economy contracted so significantly in 2020.
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