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Sterling nears 1.38 against the Dollar

Sterling nears 1.38 against the Dollar

GBP

Sterling was able to stabilise during Wednesday with underlying support from the vaccine programme and economic re-opening efforts. The UK will still have greater scope for economic recovery in the short term, although expectations of stronger EU vaccine rates damaged potential support for the Pound. 

Confidence in the global recovery was stronger and the UK currency was boosted by gains across oil and commodities. As a result the Pound moved above the 1.3800 level against the dollar.

Sterling opens today around 1.3775 against the dollar and just above 1.1500 against the Euro.

 

USD

US import prices increased 1.2% for March to give an annual increase of 6.9% from 3.0% previously, maintaining some concerns over the risk of imported inflation.

Federal Reserve (Fed) Chair Powell stated that it was highly unlikely that interest rates would be increased before the end of 2022, although the decisions will be outcome-based. He again commented that the Fed wanted inflation marginally above 2% for a long time. It was also possible to get a low unemployment rate without increasing inflation and Powell also noted that it was essential to have the needs of people at the economic margin in mind.

He reiterated that the central bank would be likely to taper bond purchases well ahead of any increase in interest rates.

There was no shift in the underlying dovish rhetoric and the dollar remained on the defensive following the comments as it retreated to fresh 3-week lows. Futures prices indicated a slightly reduced chance of rate increases by the end of 2022 which stifled dollar support. Vice-Chair Clarida stated that inflation expectations are crucially important and that a persistent drift higher in expectations would indicate that policy needs to be adjusted. He also suggested that economic projections and Powell’s press conference will provide information to determine whether sufficient progress has been made. 

 

EUR

The Euro stays pressured around the 1.1975 mark against the Dollar whilst heading into Thursday’s European session. In doing so, the single currency drops for the first time in four days, stepping back from a one-month high of 1.1989 achieved overnight.

Contributing to weakness could be the market’s cautious sentiment ahead of Germany’s Consumer Prices data and ongoing concerns around the Coronavirus vaccine. 

As of writing, the Euro currently trades just over the 1.1980 mark against its US counterpart. 

 

Data to watch

13:30 – USD – Core Retail Sales 

13:30 – USD – Retail Sales

13:30 – USD – Philly Fed Manufacturing Index

13:30 – USD – Unemployment Claims

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