GBP/USD plunges to $1.36 as risk-off mood promotes US dollar strength

Philip McHugh March 24th 2021 - 2 minute read

The US dollar trended higher on Tuesday, with the safe-haven currency finding broad support amidst a souring of market risk appetite.
 
Meanwhile, the pound continues to weaken this morning, with GBP/EUR muted at €1.1582 and GBP/USD stumbling to $1.3685. GBP/CAD has edged lower to C$1.7248, while GBP/AUD and GBP/NZD are subdued at AU$1.78012 and NZ$1.9619, respectively.
 
Coming up, will a weaker-than-expected consumer price index see Sterling extend its recent losses today?
 

What’s been happening?

The US dollar stormed higher during yesterday’s trading session, as investors favoured the safe-haven currency amidst a marked deterioration in market sentiment, as a result of concerns over the coronavirus resurgence in Europe as well as the threat of renewed tensions between the West and China.
 
Further boosting the US dollar was speculation over new US stimulus measures, with President Biden reportedly considering a $3 trillion infrastructure spending package.
 
The pound, meanwhile, remained on the defensive as a major source of Sterling’s recent resilience, its successful vaccine programme, continued to erode due to the ongoing row between the UK and EU over vaccine exports.
 
Helping to minimise the pound’s losses, however, was the publication of the UK’s latest jobs report, which revealed a surprise dip in unemployment in January.
 
At the same time, the euro also came under pressure on Tuesday, with EUR investors unnerved by the news that Germany would be extending its lockdown until after Easter, as Europe’s coronavirus situation continues to deteriorate.
 

What’s coming up?

Looking ahead, the pound is likely to face additional pressure today after the UK’s consumer price index reported domestic inflation slowed to 0.4% in February.
 
However Sterling could still find some support from the publication of the UK’s latest PMI figures, which are expected to show that economic activity in the private sector began to expand again this month.
 
The publication of the Eurozone’s own PMI figures will be in the spotlight for EUR investors today, but with the euro likely to face pressure if the bloc’s private sector continued to contract in March amidst Europe’s coronavirus resurgence.
 
Finally, in the US the publication of the latest durable goods order figures could take a dent out of the US dollar on the expectation that order growth will have slowed markedly last month.
 

Written by
Philip McHugh

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