Daily Currency Update

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Markets await US inflation data

GBP - British Pound

Another step towards normality was taken in England yesterday as coronavirus restrictions were loosened allowing non-essential retail, restaurants and pubs to reopen after months of closure. Social distancing measures are still in place and the hospitality sector was only permitted to serve food and drinks outdoors however there was reportedly plenty of trade as pent-up demand for retail therapy and a proper pint saw the public out in large numbers. Scotland and Wales are set to follow suit later this month with Northern Ireland not yet having its date confirmed however with cases falling it should hopefully follow suit in the coming weeks. Dry (if a little chilly) weather is forecast for the foreseeable future across much of the UK which will only likely draw more and more people out as we head deeper into April ahead of the next set of relaxations scheduled for May 17th.

The pound pushed higher yesterday supported by the reports of queuing at shops and busy beer gardens with GBP/USD getting close to the 1.38 handle before dropping back a little. This morning has seen a mixed bag of data with February GDP coming in a little short of estimates at 0.4% growth m/m however this was offset by the previous month being revised higher and industrial production and manufacturing numbers printing in the green.

GBP/USD trades at 1.3760 and GBP/EUR sits at 1.1560.

Key Movers

Despite the huge focus domestically on the UK's further unlocking of restrictions yesterday the markets main focus is on the US economy and especially its inflation outlook as America's vaccination programme builds momentum and new stimulus measures come into effect. Rising Treasury yields over the past couple of months have signalled that the markets expect a strong economic bounce back in the States however the Federal Reserve is keeping its cards close to its chest with regards to when it may start to tighten monetary policy and reduce the amount of cash its pumping into the system. With this in mind this afternoon's CPI data is a key area of focus. Should it show prices rising faster than expected then it may force the Feds hand into finally admitting that it needs to withdraw some of its support sooner than currently expected to control price rises. An overall monthly rise of 0.5% is eyed with the core reading which strips out food and energy costs predicted to increase 0.2%. Should the numbers read a lot different then we can expect some volatility in dollar crosses at 1:30pm.

In Europe it appears that the EU vaccination programme is finally getting some proper traction with a big uptick in jabs being given. Despite the better news the bloc is still well behind the UK and US in terms of percentage of its population having received at least one dose. Data-wise we have the monthly German ZEW Economic Sentiment report due later this morning which will give an indication of current business confidence in the EU's biggest economy. At present however the markets appear to be in wait and see mode ahead of the US inflation data. Stock markets have eked out modest gains and there is little volatility in major currency pairs. EUR/USD holds around the 1.19 mark.

Expected Ranges

GBP/USD: 1.3680 - 1.3840 ▲

GBP/EUR: 1.1490 - 1.1640 ▲

GBP/AUD: 1.7980 - 1.8150 ▲

GBP/NZD: 1.95 - 1.9670 ▲

GBP/CAD: 1.7235 - 1.7360 ▲