GBP - British Pound
There was very little movement across major currencies through trade on Thursday. A lack of high-level macroeconomic data and an absence of headline market news allowed investors to take profit from Sterling’s recent gains. GBP/USD gave up highs of 1.3855 to hold just above the 1.38 while GBP/EUR dipped below the 1.14 handle, hitting a low of 1.1376 for the day.
This morning the office for national statistics released figures showing Britain’s coronavirus-ravaged economy shrank 9.9% in 2020, the biggest annual fall in output since modern records began, but avoided heading back towards recession in the final quarter of the year.
Britain’s gross domestic product (GDP) grew 1.0% between October and December versus the previous quarter, compared with forecasts for growth of 0.5%.
This makes it unlikely that Britain will see two straight quarters of contraction - the standard definition of recession in Europe - even though the economy is set to shrink sharply in early 2021 due to the effects of a third COVID-19 lockdown.
Sterling has seen a very muted reaction to the data with GBP/USD continuing to hover around the 1.38 handle. Going forward, the vaccine rollout will remain among the key drivers for the pound.
While US CPI pressures are present in the US and inflation is set to rise, Investors appeared content to sit on the sidelines ahead of further US fiscal stimulus advice and next week’s key services and manufacturing PMI’s. With national lockdowns expected to dampen growth prospects, a surprise to the upside could help fuel further positive risk sentiment, as we saw over the past few weeks and force the USD back toward 3-year lows.
Across the other side of the world the Australian dollar extended the weeks uptrend on Thursday, creeping through 0.7750 against the USD while yesterday also saw it regain some ground against GBP. With volatility across currency markets largely muted this week the AUD has enjoyed a methodical and measured march back against most of its major peers.
With little macroeconomic data on hand to drive direction, markets have shifted their attentions back toward long run fundamental expectations. Hopes for a global economic recovery, coupled with higher commodity prices, US inflation and budget deficit concerns, have helped fuel demand across currency markets.
No further data of note is due for Friday attention now turns to next week’s US and UK retail sales along with service and manufacturing PMI numbers from the UK, US and Europe.
1.3735 - 1.3835 ▼GBP/EUR:
1.1345 - 1.1435 ▼GBP/AUD:
1.7775 - 1.7925 ▼GBP/NZD:
1.91 - 1.9250 ▼GBP/CAD:
1.7525 - 1.7625 ▲