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Sterling Quiet As BOE Meeting Approaches

Sterling Quiet As BOE Meeting Approaches

GBP

No Tier one economic data was released yesterday leaving the market to fret over the lockdown effect on the services sector. Also, tomorrow’s Bank of England policy brings the possibility that negative interest rates will be mentioned as a possible option. Trade friction was also a significant factor. As such, the Pound gained only limited support from robust global risk appetite and failed to hold above the 1.3700 mark against a stronger Dollar and drifted lower. The Euro dipped below 1.1363 before attempting to recover slightly. Sterling was supported on dips and the global risk tone continued to provide underlying support. 

The Pound opened near 1.3650 on the Dollar and around 1.1344 against the Euro as the wider global markets were watched.

 

USD

The ISM New York business conditions index declined to 51.2 from 61.3 the previous month. The IBD consumer confidence index strengthened slightly to 51.9 for January from 50.1 the previous month with no significant impact from the data.

Markets overall were still more optimistic over the US outlook compared with the Euro-zone which continued to underpin the US currency, especially with the threat of aggressive short dollar positions being covered. There was also a continued shift in market dynamics with the dollar continuing to gain support despite a further net gain in risk appetite with expectations that the US would continue to attract strong capital inflows. Commodity currencies were also unable to make headway and the dollar posted fresh 7-week highs. 

 

EUR

Eurozone GDP declined 0.7% for the fourth quarter of 2020 compared with consensus forecasts of a 0.9% contraction with the year-on-year decline of 5.1%. The data failed to provide any Euro support, especially as data from individual countries released last week suggested that there could be a smaller dip for the quarter.

The Euro continued to edge lower with markets still uneasy over the EU vaccination programme which is liable to delay any lifting of coronavirus restrictions. In Italy, talks to form a new government failed on Tuesday, with expectations that the President would ask former ECB President Draghi to form a national unity government helped underpin sentiment somewhat. 

As of writing, the Euro currently trades around the 1.2035 mark against its US counterpart. 

 

Data to watch

All Day – All Currencies – OPEC-JMMC Meetings

08:15 – USD – ADP Non-Farm Employment Change

10:00 – USD – ISM Services PMI

10:30 – USD – Crude Oil Inventories 

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