Daily Currency Update

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Sterling recovers its losses

GBP - British Pound

Sterling benefitted from data outside the UK yesterday. US GDP came in a touch under expectation showing an annualised 4% growth for the fourth quarter of 2020. This miss was countered by the previous quarter being revised higher (33.1% to 33.4%) and employment news showing unemployment claims were less than expected (847k versus forecast 880k). Overall, the US economy shrank -3.5% last year which is its worst performance since 1946. However, compared to other major economies this isn’t too bad a performance considering the UK shrank 10%.

GBPUSD touched 1.3635 at the lows yesterday morning but recovered to 1.3745 after the GDP release.

GBPEUR saw a similar move, dropping to 1.1265 early before recovering to 1.1330 on the news. Sterling may have also been bolstered by COVID-19 vaccine news as biotech firm Novavax has shown around 89% efficacy in fighting COVID and the new UK variant. The UK has already ordered 60m doses for the 2nd half of this year.

Macroeconomic data is light across the board today, but GBPEUR will likely take direction from the latest European GDP figures this morning.

Key Movers

Europe continues to have issues with AstraZeneca’s vaccine supplies. Although the vaccine hasn’t yet been approved by the European Medicine Agency it is expected to give the green light by the end of this month. The EU signed a deal in August for 300m doses, with an option for 100m more and hoped that delivery would start straight away once approval was given. The urgency comes also as Pfizer-BioNTech said last week that it was delaying shipment for the next few weeks because of work to increase capacity at its Belgium plant. This leaves Moderna as the Euro Zone's only supplier short term.

This morning we have seen a number of low to medium impact data from Europe. The most notable being German Prelim GDP q/q, which came in slightly better than expected. After the historic 9.7% slump in the second quarter of 2020, the Germany economy was recovering in the summer. In the fourth quarter, however, the recovery process slowed due to the second coronavirus wave and the lockdown that proceeded it. GBPEUR is back below 1.1300 on the news, at 1.1290 at time of writing. EURUSD is back above 1.2100.

Expected Ranges

GBP/USD: 1.3620 - 1.3750 ▲

GBP/EUR: 1.1250 - 1.1330 ▲

EUR/USD: 1.2085 - 1.2140 ▲

GBP/AUD: 1.7820 - 1.7960 ▲