GBP/USD soars past $1.40 as UK services PMI beats expectations
Philip McHugh February 22nd 2021 - 2 minute read
The pound extended its bullish run into its fifth consecutive session on Friday, courtesy of a far stronger-than-expected PMI reading.
Sterling looks to be consolidating these gains at the start of this week’s session, with GBP/EUR flat at €1.1552 and GBP/USD stable at $1.4002. GBP/CAD is rangebound at C$1.7692, while GBP/AUD and GBP/NZD hold steady at AU$1.7794 and NZ$1.9197, respectively.
Centre stage today we have the unveiling of Boris Johnson’s plan to lift England’s lockdown. Will this be enough to inspire the pound to test new highs?
What’s been happening?
The pound continued to trend higher at the end of last week’s session after the UK’s latest PMI figures revealed the vital service sector contracted at a far more modest rate than expected this month, in spite of the ongoing national lockdown.
This upside in the pound was further underpinned by the continued optimism surrounding the UK’s vaccination programme.
However, it wasn’t all plain sailing for Sterling, with GBP exchange rates initially coming under fire after the UK’s latest retail sales figures reported a whopping 8.2% plunge in sales growth in January.
The euro was also bolstered by a stronger-than-expected PMI release on Friday, with EUR investors welcoming the latest manufacturing index as it revealed activity in the bloc’s factory sector struck a three-year high.
Aiding the euro’s rally was a broad-based sell-off of the US dollar at the end of last week.
This downturn in the US dollar came on the back of improving market risk appetite, which undermined demand for the safe-haven currency.
What’s coming up?
Looking ahead, the focus at the start of this week’s session will undoubtedly be on the publication of Boris Johnson’s long-awaited roadmap for easing England’s lockdown.
This could cause the pound to test new multi-month highs today if the PM’s plan inspires confidence in the UK’s economic recovery, or weaken if GBP investors feel his plans is too cautious.
Meanwhile, the spotlight for EUR investors will be on the release of Germany’s latest business climate index this morning, with a deterioration in business confidence this month likely to weigh on the euro.
Across the pond, any developments regarding the next US stimulus package are likely to be the key focus, with the US dollar potentially weakening if Biden’s plans continue to face resistance from lawmakers.