The US dollar fell sharply on Monday as risk-on trade and falling US Treasury yields weighed heavily on the safe-haven currency.
Meanwhile, the pound is muted so far this morning, with GBP/EUR stalling at €1.1405 and GBP/USD flat at $1.3828. GBP/CAD is rangebound at C$1.7546 while GBP/AUD and GBP/NZD are subdued at AU$1.7860 and NZ$1.9140, respectively.
Looking ahead, the US dollar could attempt a rebound today, should US initial jobless claims have continued to drop last week.
What’s been happening?The US dollar extended its recent losses through yesterday’s European trading session in response to a weaker-than-expected US CPI release.
January’s CPI figures revealed that US inflation stalled at 1.4%, missing forecasts it would accelerate to 1.5% and prompting another drop in US Treasury yields.
Alongside an improvement in market risk-appetite, this undermined demand for the safe-haven US dollar.
The continued weakness of the US dollar was to the advantage of the euro, however, which continued to benefit from its negative correlation with the US currency, although the single currency’s gains were capped by reports that Germany will extend its national lockdown into mid-March.
The pound, meanwhile, continued to be underpinned by strong fundamentals, with the UK’s success with its vaccination rollout, and the Bank of England’s (BoE) recent dismissal of negative interest rates continuing to buoy Sterling sentiment.
What’s coming up?Turning to today’s session the only data release of note will be the publication of last week’s initial jobless claims in the US.
These are expected to report that jobless claims continued to fall at the start of February, confirmation of which could help to buoy the US dollar.
Meanwhile, the focus for GBP investors in the latter half of this week will turn to the UK’s latest GDP release.
The preliminary figures for the last quarter of 2020 are expected to report a modest expansion of economic growth, but the uncertainty surrounding the impact of the second national lockdown could see investors reluctant to make any aggressive bets on Sterling ahead of tomorrow’s release.
We may also see the euro face some headwinds today as lingering concerns over the EU’s vaccination rollout continue to hound the single currency.
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)