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GBP/USD fails to break $1.40 barrier despite positive budget reception

currency-newsGBP/USD fails to break $1.40 barrier despite positive budget reception
The pound ticked higher on Wednesday in response to Chancellor Rishi Sunak’s 2021 Budget statement.
Sterling remains buoyant so far this morning, with GBP/EUR ticking up to €1.1584 and GBP/USD firming to $1.3954. GBP/CAD is rangebound at C$1.7647, while GBP/AUD and GBP/NZD retreat to AU$1.7887 and NZ$1.9215, respectively.
Looking ahead, the focus today will be on the latest Eurozone retail sales, with the euro likely to stumble amid expectations of a sharp drop in sales growth in January.

What’s been happening?

The pound made modest gains yesterday, with markets generally reacting positively to Chancellor Rishi Sunak’s 2021 Budget statement as the Chancellor pledged more support for the UK’s economic recovery.
But GBP investors were less enthused by the included tax hikes, with Sunak announcing corporation tax would be rising to 25% from 2023.
The US dollar also firmed on Wednesday as the currency was once again bolstered by an upswing in US Treasury yields.
However, these gains were tempered somewhat by the release of the latest ISM non-manufacturing PMI, which revealed a surprise slowing of economic activity in the US service sector last month.
The euro, meanwhile, was on the defensive as a result of the negative correlation between the single currency and the US dollar.
Not helping the euro was also the release of the Eurozone’s own services PMI, which confirmed the bloc’s service sector suffered its sixth consecutive month of contraction in February.

What’s coming up?

Turning to today’s session, we could see the euro face some headwinds this morning as the Eurozone’s latest retail sales figures are expected to report a sharp contraction of sales growth at the start of the year.
Potentially accentuating any drop in the single currency will be the bloc’s jobs report, should it reveal that unemployment rose in January.
In the US the focus will be on last week’s initial jobless claims, where another drop in new claims could help to bolster the US dollar.
However, also influencing USD exchange rates will be a speech by Federal Reserve Chair Jerome Powell later this evening, with any upside in the US dollar likely to be capped if he reiterates the Fed’s dovish stance.
Meanwhile, with UK data thin on the ground, the focus for GBP investor may turn back to domestic coronavirus statistics, where a continued fall in infections will bolster reopening optimism.
Philip McHugh

Philip McHugh

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)

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