Daily Currency Update

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Sterling gains despite local data releases

GBP - British Pound

Yesterday the UK became the 5th country to reach 100k COVID-19 related deaths. The news was delivered by Boris Johnson in an evening press conference on Tuesday, taking responsibility for the government’s actions. However, the positive test numbers are falling day-by-day, and vaccines continue to be rolled out.

One piece of economic data released yesterday was UK CBI realised sales at 11am. Anything above 0 indicates growth, so the -50 showed a sharp contraction and is considerably lower than the -3 previously released. It comes as no surprise however as lockdown was implemented halfway through the survey period.

Sterling started yesterday on the backfoot, falling to 1.3612 versus the US dollar and 1.1231 against the euro, but recovered against these lows over the day. The above CBI realised sales and Boris Johnson’s COVID update both provided stumbling blocks for the pound’s gains but didn't deter it from maintaining its upward movement. We open around GBPUSD 1.3730 and GBPEUR 1.1330.

Key Movers

The US had its monthly consumer confidence survey yesterday, which beat expectations coming in at 89.3. This release continues the recent string of positive data releases from the US and has supported the risk-on mood.

This week’s main macroeconomic event comes from the US tonight where we await the FOMC interest rate decision. All eyes will be firmly on whether we will see a tapering of asset purchases and, if so, what date this will commence. It is unlikely that we will get any soundbites on the subject given that the vaccine rollout has just begun, the last non-farm payroll report posted a negative number, and we are due a contraction in Q4. Either way, it is worth noting for potential volatility for the US dollar.

EUR/USD still continues to trade within a narrow margin – between 1.2100 and 1.2160. The USD has lost ground against the GBP and other riskier assets, such as the AUD.

Expected Ranges

GBP/USD: 1.3690 - 1.3770 ▲

GBP/EUR: 1.1280 - 1.1380 ▲

EUR/USD: 1.2100 - 1.2180 ▲

GBP/AUD: 1.7660 - 1.7840 ▲