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Sterling holds gains as confidence continues

Sterling holds gains as confidence continues

GBP

Lockdown easing measures kept confidence in the UK economic outlook strong as with expectations of stronger activity with further lockdown easing measures taking effect next week. The Pound seemed remarkably steady despite global equity markets dropping sharply lower. Sterling has a tendency to weaken when risk conditions worsen, so resisting losses shows solid underlying buying support.

Also, further evidence that hedge funds were buying Sterling again underpinned sentiment. Overall, the Pound rose to 10-week highs above 1.4150 to the Dollar before ceding some ground while the Euro was little changed near 1.1650.

UK first quarter GDP shrank by 1.5%, meeting market expectations but with stronger than expected growth in March. There was a stronger industrial production recovery and a smaller trade deficit which helped underpin confidence. Sterling was around 1.4125 to the Dollar with the Euro still near 1.1650.

 

USD

The US NFIB small business confidence index strengthened to 99.8 from 98.2 previously, although this was slightly below market expectations.

According to JOLTS data, there was an increase in job openings to a record high of 8.12mn for March from a revised 7.53mn the previous month. Underlying confidence in the outlook remained less confident following last week’s employment report with markets also focussing on supply shortages.

The US currency was unable to gain support after yesterday’s Wall Street open with the US currency unable to gain support when equity markets lost ground.

The latest consumer prices inflation data will be released on Wednesday with consensus forecasts for the headline annual inflation to increase sharply to 3.6% from 2.6% previously due in part to the impact of falling prices last year. This would be the strongest annual rate since late 2011 and inflation fears will increase further if the data is above expectations.

 

EUR

Persisting buying opportunities in the US Dollar dragged the Euro back towards 1.2100 ahead of yesterday’s European open. The pair extended the previous day’s decline and refreshed daily lows near 1.2120. The move was primarily sponsored by the escalation of Middle-East tensions that prompts investors to move for the US currency on its safe haven appeal. 

As for now, investors turn their attention to the release of the Eurozone Harmonized Index of Consumer Prices.

As of writing, the Euro currently trades around the 1.2130 mark against its US counterpart. 

 

Data to watch

07:00 – GBP – Prelim

10:00 – EUR – EU Economic Forecasts 

10:00 – GBP – BOE Gov Bailey Speaks

13:30 – USD – CPI

13:30 – USD – Core CPI 

15:30 – USD – Crude Oil Inventories 

18:01 – USD – 10-y Bond Auction

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