Sterling flies higher on recovery hopes

Sterling made fresh gains and shares in sectors battered by the pandemic rallied as investors welcomed the plan to ease lockdown rules – albeit slowly.

As Goldman Sachs declared the UK economy was ‘well positioned for a near-term rebound’, the pound rose above $1.41 for the first time since April 2018 and topped €1.16 for the first time since March last year.

It came as travel and airline stocks made gains, on hopes that families would get away on holiday this summer.

As Goldman Sachs declared the UK economy was ‘well positioned for a near-term rebound’, the pound rose above $1.41 for the first time since April 2018

But analysts warned that hospitality firms ‘still have a long way to go before they can really open’ due to the cautious timetable outlined by Prime Minister Boris Johnson.

British Airways owner IAG, Easyjet, Wizz Air and Tui were among the winners after Johnson hinted that international travel could resume on May 17, sparking a surge in holiday bookings.

Also on the rise was Upper Crust owner SSP, which jumped 17 per cent, and WH Smith, which was up 7.2 per cent.

Both have many outlets at travel hubs such as airports and train stations.

Tui said bookings for foreign trips jumped 500 per cent, while Thomas Cook revealed traffic to its website was up 100 per cent, with bookings flooding in for countries such as Greece, Cyprus and Mexico.

Tour operator Jet2 said summer bookings had leapt 600 per cent. At the same time airline Easyjet reported a 337 per cent rise in flight bookings and a 630 per cent jump in holiday bookings for locations such as Alicante, Malaga, Palma, Faro and Crete.

Oliver Blackbourn, fund manager at Janus Henderson, said: ‘The news will be the light at the end of the tunnel for the services side of the economy, where the restrictions have been devastating.’

Overall, the FTSE 100 rose 13.70 points to 6625.94 and the FTSE 250 added 76.63 points, at 21,057.72. 

The two indices were unloved during 2020 but have risen steadily this year as the rapid vaccination rollout has drawn overseas investors to the UK.

Cecilia Mariotti, analyst at Goldman Sachs, said: ‘The FTSE 100 has been the best-performing equity market since the start of the year.

‘Considering the vaccine rollout and the decrease in infection rate and potential for an expansionary March Budget, the UK is well positioned for a near-term rebound.’

But others were frustrated that the UK is not moving faster out of lockdown, adding that over-caution is likely to hurt the hospitality sector.

Neil Wilson, analyst at Markets, said: ‘Hospitality businesses still have a long way to go before they can really reopen. The Government ought to be loosening up quicker since the data has been so encouraging.

‘The economy will have been out of kilter for 15 months by June and even then foreign travel, a rich source of income, will still likely be severely curtailed.

‘The hope is that this is the final push and we will never return to lockdowns – they have been hugely and irreversibly damaging to some of the most vulnerable.’