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Sterling Weak On Vaccine Woes

Sterling Weak On Vaccine Woes

GBP

Thursday’s positive PMI and employment data maintained confidence in the UK’s recovery outlook, but Sterling overall was unable to secure any significant support as the sharp decline this week continued to undermine sentiment. The inability to advance on robust data illustrated an important danger sign for Sterling bulls as the over extended move higher from the beginning of the year finally looks to be faltering.

There were also further uncertainties over the UK vaccine programme and a suspicion that markets had been too pessimistic over the Euro-zone outlook and with Sterling continuing to lose ground come the last trading day of the week, further reservations over the AstraZeneca vaccine will continue to be the main market driver which may well spill into next weeks trading activity. The UK currency currently finds itself just over the 1.37 mark against the Dollar and at the 1.1525 against the Euro.

 

USD

The dollar was unable to make any headway following relatively dovish Federal Reserve (Fed) minutes.

US initial jobless claims increased to 744,000 in the latest week from a revised 728,000 previously and above consensus forecasts of 680,000. Continuing claims edged lower to 3.73mn from 3.75mn, but also above market expectations while pandemic assistance claims declined slightly on the week.

Fed Chair Powell stated that monetary and fiscal policy, allied with the vaccination programme, is creating a brighter outlook. He also noted, however, that he wants to see a string of months like the latest strong jobs report and that the unevenness of the recovery is a serious issue.

Powell added that the Fed needs to keep supporting the economy and there is a risk of a setback to the recovery if there is a renewed pick up in cases. He reiterated that short-term increases in inflation would be transitory. 

The rhetoric overall remained dovish and the dollar retreated to 2-week lows.

 

EUR

The Euro is retreating further from two-week highs of 1.1927, as sellers test the 1.1900 support area amid a resurgent haven demand for the US Dollar. 

The relentless rise in coronavirus cases across Asia, concerns over the side-effects of the AstraZeneca vaccine and mixed Chinese inflation data spook investors, as they run for safety in the US Dollar. Euro traders now look forward to a slew of second-tier macro news including the Industrial Production data for a sign of optimism. 

As of writing, the Euro currently trades around the 1.1895 mark against its US counterpart.

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