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Sterling Rise Continues…

Sterling Rise Continues…

GBP

UK GDP contracted 2.6% for November, smaller than the consensus forecasts of 4.2% decline whilst the industrial production data came in weaker than expected with a sharp widening in the trade deficit.

Sterling continued to gain support from optimism over the vaccine rollout, especially with further evidence that the UK was vaccinating at a faster rate than most European countries. If the vaccination programme accelerates, there will be increased optimism over economic recovery. With The UK currency still being seen by many investors as undervalued, further optimism over a global economic recovery also provided an element of support. 

Sterling dipped to lows near 1.3625 against the Dollar before rallying amid the firmer underlying tone while against the Euro, pushed up towards a 7week high of 1.1275. As the Dollar lost ground, Sterling re-tested the 1.3700 level as overall UK sentiment held firm.

 

USD

Minutes from December’s ECB meeting reiterated that bond purchases were a more effective tool that a rate cut during the pandemic. There was further market nervousness over the risk of verbal intervention against Euro strength which tended to encourage a liquidation of positions.

US initial jobless claims increased sharply to 965,000 in the latest week from a downwardly-revised 784,000 the previous week and well above consensus forecasts of 795,000. Continuing claims also increased to 5.27mn from 5.07mn the previous week and above expectations of 5.06mn.

The data triggered fresh concerns over labour-market trends, although there were also expectations that poor data would increase demands for stronger fiscal stimulus.

 

EUR

The Euro edged higher on Thursday against the Dollar but has since been unable to hold onto gains and has since fallen throughout the Asian and into the European trading session. With a muted reaction to US President elect Joe Biden’s stimulus talk, further movement in the pair could come today alongside weekend position coverings.  

The minutes from December’s ECB meeting have been released with reiterations that bond purchases are a more effective tool than rate cuts during the pandemic. There was additional market nervousness over the risk of verbal intervention against Euro strength which tended to encourage a liquidation of positions.

As of writing, the Euro currently trades around the 1.2125 mark against its US counterpart. 

 

Data to watch

13:15 – USD – President-Elect Biden Speaks

14:30 – USD – Core Retail Sales

14:30 – USD – Retail Sales

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