The US dollar fell sharply on Monday as risk-on trade and falling US Treasury yields weighed heavily on the safe-haven currency.
As the inflation rate unexpectedly picked up from 0.6% to 0.7% on the year in January, GBP investors piled into the pound.
While inflation remains some way short of the Bank of England’s (BoE) 2% target, this uptick should sill help to limit policymaker dovishness in the near term.
However, GBP exchange rates came under some fleeting pressure at the end of the week as UK retail sales saw a dramatic -8.2% plunge on the month, reflecting the impact of the national lockdown.
The UK’s impressive vaccination programme continues to underpin the pound, with optimism the UK will make a swift economic recovery ahead of other major economies supporting Sterling.
With forecasts pointing towards an increase in December’s unemployment rate, the mood towards the pound could start to sour.
Evidence that the labour market experienced fresh weakness at the end of 2020 could undermine confidence in the health of the wider economy, leaving GBP exchange rates on the back foot.
If the government fails to encourage markets with its upcoming lockdown exit plan, the pound could be vulnerable to some selling pressure.
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)