The US dollar fell sharply on Monday as risk-on trade and falling US Treasury yields weighed heavily on the safe-haven currency.
Sterling is making tentative gains so far this morning, with GBP/EUR ticking up to €1.1555 and GBP/USD buoyed at $1.3974. GBP/CAD is rangebound at C$1.7624, while GBP/AUD and GBP/NZD hold steady at AU$1.7853 and NZ$1.9163, respectively.
Unsurprisingly, the spotlight today will be on the UK’s 2021 Budget. Will potential tax hikes overshadow fresh stimulus plans?
What’s been happening?The pound lacked any strong directional bias yesterday, as GBP investors were wary of making any aggressive bets on Sterling ahead of Chancellor Rishi Sunak’s budget announcement later today, particularly amidst speculation over tax rises.
The euro was also mostly muted through Tuesday’s trading session following the publication of some lacklustre EUR data releases.
This was kicked off with the publication of Germany’s latest retail sales, which reported a far larger-than-expected contraction of sales growth in January and was followed by the Eurozone’s consumer price index revealing that inflation in the bloc stalled last month.
The US dollar, meanwhile, retreated yesterday in response to a pullback in US Treasury yields, which in addition to an uptick in equity markets, dampened the appeal of the safe-haven currency.
What’s coming up?Top of the agenda today will be the unveiling of Chancellor Rishi Sunak’s budget for 2021 later this afternoon.
GBP investors are likely to welcome the Chancellor’s plans to extend the furlough scheme and provide more stimulus to help support the UK government’s cautious reopening plans, but will likely be less enthused by Sunak’s reported plans to raise taxes.
Accompanying the budget will also be the latest economic forecasts from the Office for Budget Responsibility (OBR), which could offer some support to the pound if its outlook for 2021 is broadly upbeat.
On the other side of the Channel, the publication of the Eurozone’s latest services PMI could limit any upside in the euro today if they confirm that the contraction in the bloc’s services sector accelerated last month.
Meanwhile, USD investors will be focused on the latest ISM non-manufacturing PMI, with the US dollar potentially advancing if the US service sector continued to expand at a robust pace in February.
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)