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Sterling Strong To Start The Week

Sterling Strong To Start The Week

GBP

The latest ONS data recorded a further decline in UK coronavirus infection rates with the estimated proportion of people infected in the latest week down to 1 in 500.

Sterling gained an element of support from relative optimism over the UK outlook with the UK currency managing to secure a break above 1.3800 against the Dollar while the Euro was undermined by the inability to hold above the 1.15. 

Rightmove reported an increase in asking prices for houses of 2.1% for April to a record high with an annual increase of 5.1% from 2.7% previously. Risk appetite holds broadly firm this morning which continues to help underpin the UK currency as it edged above the 1.3850 against the Dollar and 1.1560 against the Euro.

 

USD

US housing starts increased to an annual rate of 1.74mn for March, close to the highest level for 15 years from a revised 1.46mn previously and above consensus forecasts of 1.61mn while building permits increased to 1.77mn from 1.72mn. The University of Michigan consumer confidence index strengthened to 86.5 for April from 84.9 previously, although markets had expected a larger increase. 

The US currency was undermined by further expectations that the Federal Reserve would maintain interest rates at extremely low interest rates. If inflation moves higher, real interest rates are liable to move further into negative territory which would sap US currency support.

Relatively narrow ranges prevailed with the US currency unable to make headway despite a limited correction weaker for commodity currencies. 

 

EUR

The Euro is attempting to recover the 1.1975 area ahead of the European session, as the US Dollar’s rebound falters amid persistent weakness. 

The sentiment around the single currency remains underpinned by expectations of a pick in the area’s economic recovery, as the bloc’s covid vaccine rollouts get into gear. Encouraging German industrial activity reports also offer support to the Euro.

Looking ahead, the ECB’s monetary policy decision, due later this week, will determine the next direction for the Euro.

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