Sterling above 1.16 against the Euro
The latest UK data showed a substantial increase in shopper numbers in the latest week due to the re-opening of non-essential retail across much of the UK. The expectation of a significant increase in spending provided Sterling with an element of support.
Risk appetite also held firm which also boosted the Pound amid expectations of a strong global recovery. Sterling was also boosted by the strong performance posted on Friday which generated momentum buying. The UK currency posted strong gains to 1 month highs just below the 1.4000 level against the Dollar and 1.1630 against the Euro before consolidating.
The latest UK jobs data recorded a decline in unemployment to 4.9% from 5.0% previously. There was also a smaller than expected increase in jobless claims, although the number of people on payrolls declined for the month.
There were no major US developments with the dollar hampered by expectations that the Federal Reserve would pursue maximum employment.
US 10-year yields were little changed ahead of the New York open with the dollar remaining on the defensive. Although yields moved higher after the US open, the dollar was also unable to make headway and the US currency retreated to 6-week lows close to the 108.00 level.
There should be no commentary on the economy or monetary officials during the week ahead with the Fed in a blackout period ahead of next week’s policy meeting.
The Euro pushed higher after the European open with a break above the 1.2000 level for the first time in over six weeks triggering additional buying and further gains.
In its monthly report, the Bundesbank stated that the on-going lockdown and VAT increase contributed to weaker private consumption. There was, however, further support in the manufacturing and construction sectors and there will be a further recovery in manufacturing.
The report did not trigger a shift in the underlying narrative surrounding the German and Euro-zone economy with expectations that the EU would be able to improve the vaccine rate in the second quarter which would help boost the Euro-zone outlook after announcing it had secured a further 100mn doses of the Pfizer vaccine.
As of writing, the Euro currently trades around the 1.2015 mark against its US counterpart.
Data to watch
07:00 – GBP – CPI
11:30 – GBP – BOE Gov Bailey Speaks
15:30 – USD – Crude Oil Inventories