GBP - British Pound
The main story for the pound this week will be that of the Bank of England meeting minutes. It is expected that Bailey may once again mention the notion of negative rates, without reducing them. Analysts predict that Bailey may look at increasing the stimulus package in an attempt to offset the economic slump. Global rising bond yields will likely also be discussed.
In other news, the EU and UK are still feuding regarding the vaccine distribution. EU officials continue to blame the UK and US ministers for their lack of access to enough vaccine, which is currently hurting the eurozone economy. This is not what was needed politically, particularly after messy and longer-than-expected Brexit negotiations. In January, Britain’s trade with the EU went from 40.7% to 28.8%, as Brexit implications begin to come to light.
The US have their Fed policy meeting this week and are likely to reiterate it’s no-tightening monetary policy. Having just released their $1.9tn stimulus package for the public, analysts worry about the potential of hyperinflation in the short term. Biden has suggested that all adults will be eligible for a coronavirus vaccine by May 1st, which will likely cause the data in the 2nd half of the year to improve massively. The US Dollar isn’t expected to make the largest of gains, especially considering the rest of the global economies are picking up. If anything, investors will continue to move their capital from US Dollars to riskier assets, weakening the US Dollar in the short term.
Finally, investors will be watching Lagarde’s speech on Thursday, particularly following the ECB promising to increase the PEPP envelope. The euro has been knocked back in the short term, but is expected to strengthen in the coming months as vaccine distribution improves.