GBP - British Pound
The key economic news in the UK is the Bank of England meeting at noon. The current rising bond yields will call for a cautious response but also suggests investors believe economic growth is on the horizon. Despite Bailey alluding to the potential of negative interest rates for the last year, analysts suggest the next interest rate decision may be to raise rates, by as early as Q3 2022. It is likely Bailey will be speaking quite bullishly and therefore a short-term rise in GBP may follow. Much of the currency movement will depend on the economic outlook of Bailey.
The Fed released the minutes from their recent meeting on Wednesday evening, and economic projections were greatly improved. In fact, analysts predict the largest economic growth spurt in decades, with an initial 6.1% growth in 2021. Despite the well appreciated insight into the state of US inflation, the USD ended up weakening overnight as the Fed spoke of their plan to leave rates unchanged until 2023. Investors had priced in the notion of a rate change in 2022 and therefore many of these gains were negated.
Unfortunately, it seems to be a completely different story in the Eurozone. Slow vaccine distribution, a lack of economic stimulus provided by the central bank and new lockdowns due to be imposed, all leads to another economic contraction in Q1. The Euro continues to feel the pressure as GBP/EUR breaks 1.17 for the first time since February. On a more positive note, German ZEW came out at 74, suggested a large expansion in the economic health of the country.