The US dollar strengthened on Thursday as USD investors cheered the release of some stronger-than-expected US economic releases.
Sterling looks to be holding on to these gains so far this morning, with GBP/EUR flat at €1.1430 and GBP/USD stable at $1.3689. GBP/CAD is muted at C$1.7525 while GBP/AUD and GBP/NZD are holding steady at AU$1.7983 and NZ$1.9104 respectively.
Coming up, the spotlight today will be on the latest US non-farm payroll release. Will a rebound in the US labour market offer further support to the US dollar this afternoon?
What’s been happening?
The pound received a shot in the arm yesterday as the Bank of England (BoE) concluded its first policy meeting of 2021.
As was widely expected, the BoE opted to leave monetary policy untouched this month, although it did slash its growth forecast for the first quarter of the year in light of the UK’s third national lockdown.
However, the bank remained optimistic in its outlook, suggesting the UK economy will ‘rebound strongly’ thanks to the UK’s vaccination success. GBP investors were particularly cheered as the BoE indicated that this means negative interest rates are off the table.
The US dollar also strengthened on Thursday, extending its bullish run amid growing hopes for a strong US economic recovery.
This was reinforced by the latest US initial jobless claims, which continued to fall at a faster-than-expected pace last week.
The euro, meanwhile, struggled during yesterday’s European session as the single currency was undermined by both a stronger US dollar as well as ongoing concerns over the pace of the EU’s vaccination rollout.
What’s coming up?
Kicking off today’s session was the publication of Germany’s latest factory order figures, with the euro likely to face additional headwinds this morning following a larger-than-expected contraction in orders in December.
Meanwhile, the pound could look to consolidate yesterday’s gains so long as domestic coronavirus developments remain mostly positive.
However, the real focus of today’s session will undoubtedly be the highly influential US non-farm payroll figures.
Following on from the better-than-expected ADP employment figures and some upbeat PMI releases, there is the chance for a positive surprise with January’s figures. A stronger-than-expected release has the potential to drive the US dollar even higher if it translates into a rise in Treasury yields.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)