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Dollar soars ahead of US Jobs Report

GBP - British Pound

Its a mixed picture for sterling as we end the week with a soaring dollar seeing GBP/USD drop below 1.39 from a high of around 1.40 briefly seen yesterday afternoon. Events from across the Atlantic have been the main catalyst for the move after comments from Federal Reserve Chairman, Jerome Powell, prompted another round of dollar buying. Despite GBP/USD being lower this morning, the outlook for sterling remains positive in light of the rising number of coronavirus vaccinations paired with a falling number of cases, meaning the UK should hopefully see a strong economic rebound from April onwards.

A lot hinges on the reopening of schools, which is due to happen from Monday in England. Should we see no uptick in cases on the back of this then the UK seems set to unlock fully by June as per Boris Johnson's timeline that was announced last month. GBP/EUR has managed to retake the 1.16 handle as the euro sees some renewed pressure as the EU's recovery timeline looks like it is lengthening in contrast to the UK and America’s.

Key Movers

As mentioned before, comments from Fed Chairman, Jerome Powell, have sent USD rocketing overnight as inflation expectations begin to build in America. With US Treasury yields rapidly rising, pushing up borrowing costs, there was an expectation that Powell would issue caution over the move in an online event he took part in hosted by the Wall Street Journal. Instead, he seemed to dismiss the rally in yields and reiterated that policy would remain accommodative until the US labour market had recovered from the impact of the coronavirus crisis.

It seems Powell is willing to let inflation push above its 2% target in an effort to get as many Americans back to work as possible before he will look to tighten monetary policy. As a result, stock markets around the world have dropped and the dollar’s safety sought as investors shun riskier assets. Illustrating this has been a dramatic slump in the Australian dollar over the past week. AUD/USD managed to reach 0.80 for the first time in three years on Feb 25th however it is now back below 0.77.

EUR/USD has also seen a sharp fall in the past 24 hours with it making a decisive break below 1.20 on the back of Powell's comments. Only last week it reached 1.2250, however a rapid repositioning from investors in light of rising yields and rising coronavirus cases in some parts of the EU have seen the single currency sold off in pretty dramatic fashion.

Today we could see yet more volatility with the monthly US Jobs Report scheduled for release at 1:30pm. Markets are expecting the headline Non-Farm Payrolls number to show 197k added to the labour force for February with unemployment predicted to hold at 6.3%. EUR/USD currently sits at 1.1935 with USD/JPY up to 108.4.

Expected Ranges

GBP/USD: 1.38 - 1.3950 ▼

GBP/EUR: 1.1545 - 1.1660 ▲

GBP/AUD: 1.7930 - 1.81 ▲

GBP/NZD: 1.9290 - 1.9450 ▲

GBP/CAD: 1.75 - 1.7640 ▼