GBP - British Pound
The last few months have seen a shift in tone in the global financial markets. The last few years have seen the market focus much of its time and energy on political events. Whether it be Brexit, US elections or pandemics, data points such as GDP, PMI's or unemployment took a back seat, with sentiment driving market behaviour.
The last few weeks have seen a change to all this, with the importance of market data returning. With a road out of the pandemic in sight, analysts are now looking for clues about which economies are going to grow the fastest, and who might lag behind in our race out of lockdown.
This week sees a busy week for the pound, with employment data released on Tuesday, CPI data out on Wednesday, and retail sales data released on Friday. These data points will not only give us a clue as to how the economy is and will do, but also signs on how inflation is faring, something the global central banks are keeping a close eye on at the moment.
Buoyed by more good news of the vaccination rollout, with news over the weekend that the UK had a third consecutive record breaking day on Saturday of vaccinations administered, Sterling could be on the front foot this week, but any weak data points, plus strength from the likes of the US dollar, could put a quick stop to all of this.
The US dollar was on the front foot at the end of last week after markets took risk off the table. The Federal Reserve announced that the change to the supplementary leverage ratio for banks would expire at the end March, meaning banks would have to hold more capital, and hence wouldn't be able to provide as much liquidity to the markets at a time when it is needed. Jerome Powell, chair of the Federal Reserve did state that he would continue to support where necessary, but stocks sold off, yields rose, and the US dollar soared.
The Euro could see further pressure this week as there was a widening in yields between the US and European treasury yields. The euro is in for a big week, with several key data releases to keep an eye on. Among the most important are the purchasing managers’ indexes for the Eurozone on Wednesday and the German Ifo business climate index on Friday. Consumer confidence figures for the Eurozone release on Wednesday and Germany on Thursday which could also be important, particularly as the markets are paying more attention to the statistics now than they have been for some time. EU leaders will meet on Thursday and Friday in Brussels to discuss the response to the pandemic and the region’s economy, among other topics.
1.3810 - 1.3900 ▼GBP/EUR:
1.1620 - 1.1720 ▲EUR/USD:
1.1820 - 1.1910 ▼GBP/AUD:
1.7820 - 1.8100 ▲