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Pound rises towards 1.16 against the Euro

Pound rises towards 1.16 against the Euro

GBP

UK manufacturing PMI was printed slightly higher at 60.9. Mortgage approvals fell to 82,700 for March, failing to match forecasts of 92,000 but mortgage lending leapt up to £11.8bn for the month, from £6.2bn previously. The strongest mortgage lending result on record was likely caused by buyers looking to complete before the original stamp-duty window closed. Overall lending data remained subdued as borrowers continued to repay consumer debt. Sterling was firm through early morning but dipped into the New York market open after failing to threaten the 1.3900 level against the Dollar. Equity markets dipped and added to the caution ahead of Thursday’s Bank of England meeting.As the European trading day ended the Pound attempted another assault on the 1.3900 mark against the Dollar while the Euro slipped to just below 1.1560. 

This morning risk appetite has stabilised and Sterling has edged above 1.3900 to the Dollar and the Euro remains near 1.1589. Expectations that the Bank of England will use positive rhetoric tomorrow is helping to support the Pound.

 

USD

The US goods and trade deficit widened to a record $74.4bn for March from a revised $70.5bn previously as imports increased sharply. There were concerns that the deficit could damage dollar sentiment over the medium term, especially with expectations that there would be very strong import demand in the short term.

Risk appetite dipped after the Wall Street open yesterday which created an element of defensive US dollar demand. Commodity currencies posted further losses which underpinned the US currency.

US Treasury Secretary Yellen stated that interest rates might need to rise to keep the economy from overheating given the very expansionary fiscal policy. The comments triggered fresh concerns that the Federal Reserve (Fed) might raise interest rates. The dollar jumped higher on the comments, but was unable to sustain the advance in choppy trading conditions. Subsequently, Yellen stated that she was not predicting or recommending higher rates and maintained a generally dovish stance which helped minimise any further market impact, especially as she also expected any inflation increase to be transitory. The dollar was unable to gain further traction and drifted on Wednesday with the Euro just above 1.2000 ahead of the US ADP jobs data.

 

EUR

The Euro drifted towards the 1.2000 area with no major Euro-zone developments.

Economist at Nordea  Thinks The fixed income market also reflects relative growth perspectives, which simply look more upbeat in the US compared to in Europe, among other things due to a more successful vaccine roll-out. We target 1.15-1.16 in EUR/USD.

 

Data To Watch

Tentative – EUR – EU Economic Forecasts

13:15 – USD – ADP Non-farm Employment Change

15:00 – USD – ISM Services PMI

15:30 – USD – Crude Oil Inventories 

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