GBP/USD rallies to $1.37 as Biden inauguration cheers markets

A clear risk-on mood prevailed on Wednesday as markets welcomed Joe Biden’s first moves as president.
 
Meanwhile, the pound remains buoyed so far this morning, with GBP/EUR stable at €1.1312 and GBP/USD climbing to $1.3708. GBP/CAD has risen to C$1.7295, while GBP/AUD and GBP/NZD hold steady at AU$1.7649 and NZ$1.9013, respectively.
 
Coming up, the spotlight today will be on the European Central Bank (ECB) as it delivers its first rate decision of 2021.
 

What’s been happening?

The pound started strongly yesterday, being buoyed by the ongoing optimism over the pace of the UK’s vaccination rollout as well as the publication of December’s better-than-expected consumer price index.
 
However, the pound was unable to sustain these gains and subsequently relinquished some ground through the latter half of the European session.
 
Meanwhile, the euro experienced a broad sell-off on Wednesday, amidst rising coronavirus concerns.
 
These concerns were centred on the EU’s slow progress on vaccinations as well as worries that more countries could follow Germany in extending their lockdown measures due to the spread of more infectious strains of the coronavirus.
 
At the same time, the US dollar trended lower through the first half of yesterday’s European session, with growing optimism ahead of Joe Biden’s inauguration undermining demand for the safe-haven currency.
 
This gave way to a rebound in the US dollar immediately following Biden’s inauguration, but one that quickly faded as his first moves cheered market sentiment.
 

What’s coming up?

Looking ahead, the spotlight today will be on the European Central Bank’s first policy meeting of 2021.
 
We aren’t expecting the ECB to make any changes to its monetary policy this month, but its comments on the strength of the euro could potentially infuse some volatility into EUR exchange rates.
 
Meanwhile, so long as UK coronavirus statistics continue to print positively, it seems likely we will see the pound seek to extend its upward momentum.
 
On the other side of the Atlantic, we can expect to see US politics remain in focus, as Biden gets to work in his first full day of his presidency.
 
Also of note to USD investors will be last week’s initial jobless claims, amidst the risk that claims topped 1 million following a surge in new unemployment claims in recent weeks.