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Sterling continues to rise

Sterling continues to rise

GBP

The relaxation of lockdown restrictions underpinned sentiment but Sterling was still held in a narrow trading range. Reservations remain for the Indian covid variant and it’s potential to disrupt plans for the next lockdown relaxation planned for June. Risk appetite remained steady as markets continued to focus onglobal inflation developments. UK equities had buying support on dips which provided protection for the Pound.

Bank of England external MPC member Gertan Vlieghe stated that this year’s economic growth should be considered a return to normal, not a boom and that inflation may shoot above target in the near term. Sterling pushed to highs near 1.4150 to the US Dollar while the Euro settled close to 1.1630.

Today, a solid risk appetite has allowed Sterling to post further gains and domestic coronavirus reservations have not tempered that. UK job market data printed stronger than expected with unemployment held at 4.8% from 4.9% previously while the jobless claimant count declined. At the time of writing Sterling trades near 1.4180 to the Dollar and 1.1650 to the Euro.

 

USD

The New York Empire manufacturing index edged lower to 24.3 for May from 26.3 the previous month, but slightly above consensus forecasts of 24.0. The new orders index strengthened at a slightly faster pace on the month with investors also increasing at a faster pace. There was a slight slowdown in the rate of employment growth while prices increased at a faster rate. The prices paid and prices received indices both hit record high for the month and companies expected only a slight moderation in upward pressure on a 6-month view. The data continued to fuel market inflation expectations.

Federal Reserve (Fed) vice-chair Clarida stated that the central bank must be attuned and responsive to incoming results to guarantee that inflation is transitory and that the Fed would act if the data threatens to put inflation expectations higher. He added that the economy is in a very fluid area, maintaining underlying market uncertainty.

The overall rhetoric from Clarida continued to suggest a slight shift with the Fed potentially laying the groundwork for a policy shift later this year.

Atlanta Fed President Bostic stated that prices will increase as a function of pent-up demand and that he will be watching to assess how quickly the economy improves.

Dallas head Kaplan maintained a bullish outlook on the US economy and reiterated that the first interest rate hike could take place in 2022.

 

EUR

The Euro is currently posting gains around the 1.2190, up after an initial uptick to pass weekly tops as we begin Tuesday’s trading session. With broad-based US Dollar selling, amid risk-on mood, the currency pair awaits its Eurozone GDP reading and comments from ECB President Christine Larage for fresh impulse.

 

Data to watch

15:00 – GBP – BOE Gov Bailey Speaks

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