Sterling Continues Upside Momentum
The latest data on the UK indicated that there had been a substantial increase in shopper numbers in the latest week. Although the increase was not a surprise given the re-opening of non-essential retail outlets across much of the UK, expectations of a strong increase in spending provided an element of Sterling support.
Overall risk appetite also held firm which provided an element of initial Sterling support amid expectations of a strong global recovery with the UK currency also being boosted by the strong performance posted on Friday which generated momentum buying.
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. Sterling tested the 1.4000 area against the fragile Dollar and the 1.1630 against the Euro.
There were no major US developments with the dollar hampered by expectations that the Federal Reserve (Fed) 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
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.
There were some concerns over geo-political tensions with the US expressing deep concerns over Russian plans to block parts of the Black Sea and also criticised military build-up on the Ukraine border.
The Euro is extending the advance towards 1.2075, mainly driven by the ongoing decline in the US Dollar and EU’s covid vaccine optimism.
After a brief consolidative stint, the Dollar continues its decline across the board heading into the European session, as the risk on market mood dims the greenback’s safe-haven status.
The EU will secure additional 50 million Pfizer/BioNTech doses while the J&J vaccine issue could be resolved shortly, which could help ramp up the vaccine supplies. Expectations of a faster Eurozone’s economic recovery amid the vaccine optimism is reflective of the rise in the German yields, offering additional support to the Euro.
Markets now await the ECB monetary policy decision for fresh trading opportunities with current dynamics in the Dollar and vaccine updates continue to influence.
Data to watch
07:00 – GBP – Claimant Count Change