Pound firms as UK vaccine rollout expands

Philip McHugh May 27th 2021 - 2 minute read

The pound found some modest support on Wednesday, with optimism over the UK’s vaccine rollout offering support to the currency.
Sterling is subdued so far this morning however, with GBP/EUR muted at €1.1569 and GBP/USD flat at $1.4112. GBP/AUD is rangebound at AU$1.8216, while GBP/CAD and GBP/NZD have ticked down to C$1.7091 and NZ$1.9336, respectively.
Looking ahead, will a robust durable goods orders reading from the US help to propel the US dollar higher this afternoon?

What’s been happening?

The pound was mostly rangebound through yesterday’s trading session, as GBP investors focused on UK coronavirus developments.
While traders remained concerned by the recent rise in coronavirus cases and its potential impact on the government’s roadmap for easing restrictions, the news that the UK’s vaccine programme has now been expanded to all adults over 30 helped to prop up Sterling sentiment.
The US dollar, meanwhile, staged a comeback on Wednesday as a softening of market risk appetite bolstered the appeal of the safe-haven currency.
This uptick in USD exchange rates was supported by comments from Federal Reserve policymaker Randal Quarles, who suggested that inflation will ‘meet the bar for tapering later this year’.
This uptick in the US dollar came at the expense of the euro, with the negative correlation in the EUR/USD pairing leaving the single currency vulnerable to some profit taking.

What’s coming up?

Turning to today’s session, the spotlight will be on the latest US durable goods figures, where a rise in goods order growth in April could bolster the appeal of the US dollar.
Also influencing USD exchange rates this afternoon will be the latest US GDP estimate. Will an upward revision to growth in the first quarter of 2021 provide additional support for the ‘Greenback’?
For EUR investors, the spotlight looks to be on a speech by European Central Bank (ECB) Vice-President Luis de Guindos, with the euro poised to weaken if he reinforces Christine Lagarde’s position that it is too early for the ECB to start discussing the tapering of its bond purchases.
Finally, in the absence of any notable UK economic releases, we expect to see GBP investors continue to look to domestic coronavirus headlines for fresh impetus.

Written by
Philip McHugh

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