Support for the pound weakened over the course of the last week as the initial boost from the government’s lockdown exit plan announcement faded.
Sterling appears to be consolidating these gains so far this morning, with GBP/EUR flat at €1.1267 and GBP/USD muted at $1.3660. GBP/CAD is rangebound at C$1.7327, while GBP/AUD and GBP/NZD rise to AU$1.7641 and NZ$1.9009, respectively.
Looking ahead, GBP exchange rates may tick higher again today after data published this morning reported a smaller-than-expected drop in UK economic growth in November.
What’s been happening?The pound struck higher during yesterday’s trading session, with Sterling enjoying positive flows courtesy of the UK’s vaccination programme as vaccines administered accelerated past 2.2 million.
This helped to overshadow ongoing concerns over the high rate of infection in the UK and the pressure this is placing on the NHS.
Meanwhile, the tone towards the euro remained bearish on Thursday following the publication of the minutes from the European Central Bank’s (ECB) December policy meeting.
These revealed that members of the ECB’s Governing Council had expressed concerns about the recent appreciation of the euro and how this could impact the bank’s attempts to bolster inflationary pressures in the Eurozone.
Finally, after holding its ground through the European session, we saw the US dollar fall back yesterday evening after Federal Reserve Chair Jerome Powell reaffirmed the Fed’s commitment to its accommodative monetary policy.
However, the US dollar then recovered again overnight as US President-elect Joe Biden's announcement of a $1.9 trillion stimulus package was in line with expectations, and did little to boost market optimism.
What’s coming up?Kicking off today’s session was the publication of the UK’s latest monthly GDP release.
November’s figures, while reporting a slump in growth as a result of the lockdown in place at the time, actually revealed a smaller-than-expected contraction of –2.6% against forecasts for a 5.7% drop. This may offer some support to the pound through today’s session.
Across the Channel, the focus today is likely to be European coronavirus developments, with the euro potentially facing some hurdles if EUR investors remain concerned by the slow rollout of coronavirus vaccines across the continent.
Closing out the week we have the release of the latest US retail sales figures, which could place some pressure on the US dollar later this afternoon if sales growth underperformed again in December.
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)