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Sterling Hit By Market Sell-Off

Sterling Hit By Market Sell-Off

GBP

Sterling held firm in early Europe yesterday, but underlying pressure for a correction gradually increased during the day and losses accelerated after the open of the US trading session. Market concerns over underlying UK fundamentals curbed the potential for further buying even though underlying vaccine optimism continued.

Risk appetite also deteriorated, triggering a sharp Sterling correction with the UK currency sliding to 1.1495 against the Euro and 1.40 against the Dollar. Overall risk conditions remain fragile on Friday which further limited Sterling support. Markets remain wary over month-end position adjustment which could trigger further Sterling volatility through-out Fridays trading session. 

 

USD

US initial jobless claims declined sharply to 730,000 in the latest week from a revised 841,000 the previous week and well below consensus forecasts of 835,000. Continuing claims also declined to 4.42mn from 4.53mn previously, although there was a renewed increase in pandemic emergency benefits for the latest week.

Durable goods orders increased 3.4% for January from 1.2% previously and above market expectations of a 1.1% gain with underlying orders increasing 1.4%.

Kansas City Federal Reserve (Fed) President George stated that Fed policy is set to remain highly accommodative for some time and the Fed is positioned to be patient. She reiterated that the real level of unemployment was much higher than the official data.

 

EUR

The Euro broke to highs just below the 1.2240 against the Dollar but is now trading around the 1.2145 in early Europe as month end flows were being cited as the major factor behind the single currencies move higher. 

German consumer confidence recovered to -12.9 for February from -15.5 the previous month and stronger than consensus forecasts. Euro-zone industrial confidence recovered to -3.3 for February from -6.1 previously while the services-sector sentiment improved slightly to -17.1 from -17.7 as coronavirus restrictions continued to have an adverse impact. Euro-zone money supply growth strengthened to 12.5% in the year to January from 12.3% previously. The German 10-year bond yield also increased to -0.25%, the highest level for 11 months, which unsettled equity markets, but provided near-term Euro support.

 

Data to watch

09:45 – USD – Chicago PMI

All Day – All Currencies – G20 Meetings

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