GBP/USD refreshes 34-month high as UK lockdown exit plan unveiled
Philip McHugh February 23rd 2021 - 2 minute read
The pound opened this week’s session on the front foot as the UK government published its plan on how it will ease lockdown measures in England.
Sterling remains buoyant so far this morning, with GBP/EUR stable at €1.1581 and GBP/USD firming to $1.4089. GBP/CAD and GBP/AUD are holding steady at C$1.7749 and AU$1.7805, respectively, while GBP/NZD has climbed to NZ$1.9264.
In the spotlight today we have the Federal Reserve’s Jerome Powell, who will be testifying in front of Congress about the bank’s monetary policy.
What’s been happening?
The pound struck higher through yesterday's trading session as the publication of Boris Johnson's roadmap for easing England’s national lockdown was welcomed by markets.
While the PM’s four-step plan may be a little slower than GBP investors had initially hoped, with roughly five weeks between each stage, the promise that things will be ‘incomparably better’ by summer appeared to be enough to maintain Sterling's positive trajectory.
The US dollar, meanwhile, got off to a rough start this week, as demand for the safe-haven currency was dampened by the prevailing risk-on mood.
This dip in the ‘Greenback’ was hastened by another drop in US Treasury yields during the European trading session.
The euro benefited from the drop in the US dollar, however, due to the negative correlation in the pairing.
Aiding the euro were also comments from European Central Bank (ECB) President Christine Lagarde, who suggested she is confident in the bank’s ability to support ‘all sectors of the economy’ through its Pandemic Emergency Purchase Programme (PEPP).
What’s coming up?
Turning to today’s session, the focus will be on Federal Reserve Chair Jerome Powell’s two-day testimony in front of Congress.
Analysts expect Powell to emphasize the Fed’s current dovish bias as he speaks before the Senate Banking Committee, which could weigh on the US dollar.
However, any weakness could be offset should he voice his support for the new administration’s push for more fiscal stimulus measures.
In the meantime, the publication of the UK’s latest jobs figures earlier this morning may slow the pound’s ascent today after domestic unemployment rose to 5.1% for the first time since 2016.
Across the Channel, the Eurozone’s latest consumer price index reading could help to buoy the euro this morning should they confirm that inflation in the bloc rebounded sharply last month.