Sterling halted by covid variant concern

GBP

Confidence in the UK recovery remained but reports of a UK few cases of the Indian coronavirus variant did cause a bit of concern. Scientific advisers met and there was some concern that the UK re-opening could be threatened, perhaps with local lockdowns which would undermine the recovery potential.

Risk appetite steadied, but some caution remained over the threat of renewed volatility. There were also expectations that Eurozone performance would improve, limiting the UK relative advantage and providing Euro support over the medium term. Sterling hovered between 1.4000 and 1.4050 to the Dollar, while the Euro settled close to the 1.1625 level as narrow ranges prevailed during the day. 

This morning Sterling opens close to 1.4050 against the Dollar and 1.1615 to the Euro.

 

USD

Markets were digesting the US CPI inflation data with a further discussion of central bank and market implications. There were still expectations that the Federal Reserve (Fed) would maintain a supportive monetary policy in the short term.

US producer prices increased 0.6% for April, above consensus forecasts of a 0.3% increase with a year-on-year increase of 6.2% from 4.2% previously. Underlying prices increased 0.7% on the month with a year-on-year increase of 4.1% from 3.1%.

The higher than expected wholesale inflation rate maintained underlying inflation concerns in the markets. There was, however, a composed market reaction to the data.

Initial jobless claims declined to a fresh 13-month low of 473,000 for the latest week from 507,000 previously and below consensus forecasts of 490,000. Continuing claims also declined slightly to 3.66mn from 3.70mn the previous week.

 

EUR

The Euro is currently picking up bids against the Dollar, firmer for the second consecutive day after breaking through the 1.21 mark, heading into Friday’s European session. The major pair refreshed weekly lows on Thursday before bouncing off the key support around the 1.2045 region. Extending its overnight moves are in the hopes of upbeat ECB minutes from the April meeting versus cautious sentiment over the US Retail Sales.  

 

Data to watch

13:30 – USD – Core Retail Sales

13:30 – USD – Retail Sales

14:15 – USD – Industrial Production

15:00 – USD – Prelim UoM Consumer Sentiment