The Pound had a solid start to Friday and slowly made progress during the day. Bank of England Monetary Policy Committee member Michael Saunders said that the bank’s forecast of UK performance this year may have been too negative. He also stated that the unemployment rate was likely to peak at a significantly lower rate and that there was little certainty over the amount of spare capacity in the economy. Spare capacity means that companies are unlikely to drop prices and therefore reduce upward pressure on inflation.
Overall there was greater optimism over the economic recovery as the UK began easing restrictions. Firmer risk appetite also provided net Sterling support, especially as commodities gained. The Pound tested levels above 1.3800 to the Dollar while the Euro dipped to test support below 1.1695.
Futures market data recorded another decline in bets on Sterling rising which suggests a decline of hedge fund interest.
This morning, risk appetite seems curbed and Sterling opens lower at 1.3760 to the Dollar as we approach month-end adjustment time over the next few days.
US personal income declined 7.1% for February after a strong 10.1% surge the previous month and close to expectations while personal spending declined 1.0%.
The core PCE prices index increased 0.1% for February, in line with market expectations and the year-on-year rate declined slightly to 1.4% from 1.5%.
The University of Michigan consumer confidence index was revised up to 84.9 from the flash reading of 83.0 and optimism over the growth outlook remained strong.
The US goods trade deficit widened to $86.7bn for February from $84.6bn the previous month with exports declining at a faster rate than imports. The data reminded markets that the US dollar could be potentially vulnerable to unease over wide trade and budget deficits.
The recovery attempts in the Euro remain capped below 1.1800 against the Dollar, as traders remain on the defensive as we begin a shortened US payrolls week. With little movement overnight, the single currency remains at the mercy of the market as on-going concerns over the Eurozone coronavirus developments hampering any upside potential. Germany have also now classified France as a high-risk area which could cause some friction further down the line.
As of writing, the Euro currently trades around the 1.1785 mark against its US counterpart.
Posted in Daily Market News on Mar 29 2021