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Vaccination Programme Continues to Support Sterling

Vaccination Programme Continues to Support Sterling

GBP

UK mortgage approvals declined slightly for December, although it was still close to 13-year highs and the overall figure for 2020 was the highest since 2007. 

Sterling maintained a firm tone in European trading, although sentiment was hampered by a persistent inability to hold above 1.3700 against the dollar and retreated to the 1.3670 area as the dollar regained ground. Sterling held steady on Tuesday with optimism over the UK vaccination programme continuing to provide underlying support with the UK currency held just below 1.3700 against the dollar.

The Pound opens at the 1.1341 mark against the Euro and just below 1.3700 against the Dollar.

 

USD

US yields were unable to make headway on Monday, but the US currency maintained a firm tone. The underlying demand for the yen, Swiss franc and Euro remained limited during the day which helped provide the US currency with net support.

The US PMI manufacturing index was revised slightly to 59.2 from the flash reading of 59.1. The ISM manufacturing index declined to 58.7 for January from 60.5 the previous month and below consensus forecasts of 60.0. There were also slowdowns in the rate of growth for new orders and production, although both components remained historically strong. Employment increased at a slightly faster pace on the month while there was a stronger increase in prices on the month.

President Biden met with 10 Republican Senators in an attempt to find a deal on the proposed economic support package. Although there was no deal, the talks were described as productive which helped underpin risk appetite amid hopes that a substantial package would be agreed relatively quickly.

 

EUR

The final Euro-zone PMI manufacturing index was revised marginally higher to 54.8 from the flash reading of 54.7. The Euro-zone unemployment rate held at 8.3% for December which was in line with market expectations. 

The Euro was unable to gain support from the data and gradually lost ground on further weak German retail sales data. Continuous underlying concerns over the EU vaccine developments and the risk that the Euro area will further lag behind other major nations. The single currency dipped towards 1.2080 at the beginning of the US session with the US currency securing wider support. The Euro did attempt a rally, but was unable to sustain the move and declined again into the European close as gains in the equity market supported the Dollar.

Narrow ranges continue to prevail this morning with the Euro securing marginal relief as risk appetite holds firm. As of writing, the single currency currently traders around the 1.2070 area against its US counterpart.

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