Pound ticks up amid improving market mood

The pound firmed on Monday as the currency was supported by a slightly more bullish market mood.

Sterling is off to a mixed start so far this morning, with GBP/EUR flat at €1.1680 and GBP/USD climbing to $1.2742. GBP/CAD is buoyed at CA$1.7161, while GBP/AUD and GBP/NZD dip to AU$1.9310 and NZ$2.0882, respectively.

Coming up, will an improvement in Eurozone consumer confidence help to strengthen the euro today?

What’s been happening?

The pound opened this week’s session on positive footing, as the increasingly risk-sensitive currency was strengthened by an improving market mood.

However, Sterling’s gains were tempered by UK growth concerns as analysts warned ‘there’s a good chance’ the UK slipped into a technical recession at the end of 2023.

The same improvement in risk appetite acted as a headwind for the US dollar on Monday amid a reduction in safe-haven demand.

The modest downturn in the ‘greenback’ was also reinforced by a sizable drop in US Treasury yields.

At the same time, the euro was subdued yesterday, with investors seemingly wary of the single currency as they await the European Central Bank’s (ECB) latest interest rate decision later in the week.

What’s coming up?

Turning to today’s session, the pound opens on solid footing after data showed that government borrowing was much lower than expected in December, boosting hopes for larger tax cuts in Jeremy Hunt’s Spring Budget.

For EUR investors the focus today will be on the publication of the Eurozone’s latest consumer confidence survey.

January’s index is expected to report consumer morale in the bloc continues to improve, but that the outlook remained largely negative. Could a modest uptick in this month’s index extend some support to the euro later this afternoon?

Meanwhile, in the absence of any US data, movement in the US dollar is likely to be dictated by market sentiment. If the mood remains upbeat this could drag on the US dollar.