GBP - British Pound
Yesterday saw another day of profit taking from investors as they reaped the benefits of the surge we have seen in the pound. As a result GBP/USD dipped back below 1.40 whilst GBP/EUR saw a return towards 1.14. There has been a suggestion amongst some analysts that the pound is once again resembling an emerging market currency but with relative political certainty at the moment (vs all the Brexit uncertainty during '19/'20) this assessment is harsh. The pound is certainly volatile as of late having risen from the depth of GBP/USD 1.32 and GBP/EUR 1.09 from December but the moniker of emerging market currency is unjustified.
Despite this, fundamentally all the cogs are in order for sterling to rebound and nothing has changed. For the time being the pound should still benefit as a result of the 'vaccine trade'.
Federal Reserve Chairman Jerome Powell must be pulling out his hair at the moment. Despite saying that interest rates would remain very loose and accommodating for a long while and not rise as recently as Wednesday and having the rest of the Fed reiterate that message yesterday the market is still convinced of the opposite. The 'taper tantrum' we are seeing in the US is being driven by the belief that the Fed will have to step in and raise rates to wind in inflation. Perhaps it is this 'tantrum' aspect to proceedings as to why investors are completely ignoring the Federal Reserve, something any parent could relate to.
Because of this we have seen a shift yesterday away from risk and US equities in particular have suffered as a result with investors worried about holding expensive assets when borrowing costs soar. As a result the dollar Index has rebounded and measured against a basket of its peers the US dollar is back on the front foot.
One peer though stands out and that is the Australian Dollar. AUD/USD finally broke through 0.8000 reaching its highest level in three years before retracing back down.
1.3900 - 1.4200 ▼GBP/EUR:
1.1400 - 1.1650 ▼GBP/AUD:
1.7700 - 1.7815 ▼EUR/USD:
1.2120 - 1.2240 ▼