To help you to plan for the future, this article will explore the affect that an easing of travel restrictions could have on the financial market
If you’re a jet-setter, then the announcement that international travel is set to resume from the 17th May 2021 might have spurred you to think about your next holiday destination. Equally, if you have an investment in the financial market, you could be considering the effect that this resumption of travel could have on prices. Whether you’re investing in the foreign exchange (forex) or stock market, external factors that affect the economy — such as easing of lockdown restrictions —could have an effect on the volatility of the market.
You can keep track of fluctuations in the markets and take part in stock and forex trading on platforms like Plus500, which will allow you to speculate on price movements, make future predictions and open and close trades accordingly. To help you to plan for the future, this article will explore the affect that an easing of travel restrictions could have on the financial market.
The effect of travel restrictions on the economy
Restrictions and bans on both national and international travel worldwide, are just one of the drastic measures that governments have had to implement in an attempt to reduce the spread of coronavirus. This, along with a complete halt of business in many sectors, has caused economic activity to fall sharply.
In 2018, UK travel and tourism industries made up 6.7% of the economy’s gross value, which indicates why restrictions and bans have had such a dramatic effect on the economic landscape of the country during the pandemic. The first nationwide lockdown in the UK was ordered on the 23rd March 2020, which saw an end to all non-essential international travel. As a result, the country’s figures for tourism and travel turnover were at all all-time low in May 2020, and at a level that was 26% lower than the recorded level in February of the same year.
At times of economic crisis, the stock market can decline dramatically and continue to do so for a prolonged period, as the country recovers following a recession. The forex market is also directly impacted by factors such as unemployment, which is high in times of economic struggle. In 2020, 21 countries worldwide saw their currency fall in value by over 10% and nine of those countries experienced a loss of over 25%.
The stock market
As each restriction has been eased in the UK, the economy has responded with substantial growth spurts. In the first three months of this year, when the country remained in a national lockdown, the economy was experiencing a quarterly growth rate of 1.5%. At the time of writing, restrictions have been eased on outdoor hospitality, such as bars and pubs, and some areas of leisure have resumed business. This easing of restrictions has promoted an optimism with regards to the economy and it is expected that the Bank of England’s next economic growth update will be particularly positive.
This positive outlook is set to continue as the travel sector re-opens, which will see tourism resume between specific countries listed in a green, amber and red list, and the UK, along with other countries, should continue to build economic momentum. So, what effect has this economic optimism, along with an announcement of the resumption of travel, had on the stock market?
This strong sense of hope, with regards to worldwide recovery drove stock prices to record highs in April 2021. The European STOXX (STOXX) index, which consists of 600 major companies experienced an increase of 0.3%. Furthermore, the FTSE 100 index (FTSE) rose by 0.2%.
The forex market
The British pound (GBP) has also been positively affected by the easing of lockdown restrictions, and with travel set to resume and people plan to exchange their currency, there will be a close focus upon global exchange rates. At the time of writing, the pound has increased in value by over 1.5 cents, placing it at $1.41 against the US Dollar (USD), which is the first time that this has occurred since the end of February this year.
This growth has been directly influenced by the Bank of England’s optimistic predictions for a spurt in employment rates and subsequently, economic growth. This has also placed the pound one cent above the euro, at a rate of €1.161.
The outlook for the financial market is positive as many major countries are experiencing economic growth, spurred by vaccination rollout systems, and with the easing of restrictions and the future resumption of tourism, when travel restrictions are eased.
