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Dollar slips on inflation data

GBP - British Pound

With coronavirus restrictions being relaxed in England on Monday, there was welcome news for Scots as some of the "stay local" guidance that had asked people not to travel long distances to see one another, will come to an end on Friday ten days earlier than had previously been outlined. Scotland will follow England in allowing hospitality and non-essential retail to reopen on April 26th, as the rest of the UK slowly follows England’s path out of lockdown. Away from Covid-19, there was the unexpected news that Andy Haldane the Chief Economist of the Bank of England is set to step down from the role in June. As one of the members of the nine-person team that sits on the Monetary Policy Committee, it means there will be a vacancy to fill after the Bank's June interest rate decision. The news that Haldane was leaving came out of the blue and caused GBP/USD to briefly dip below 1.37 yesterday, however it soon retook the handle and climbed even further as US news was the main catalyst in the forex space yesterday. Domestically it’s another quiet day with little data of note. Coronavirus infections, hospitalisations and deaths all continue to fall coinciding with the news that all over 45's can now apply to get vaccinated via the NHS website. GBP/USD currently trades just below 1.38 and GBP/EUR is up to 1.1530.

Key Movers

All eyes were firmly fixed on the US yesterday, as one of the most eagerly awaited inflation prints in months (if not years) came out a little higher than had been predicted. The overall monthly uptick for March was shown as being 0.6% (vs 0.5% expected) and the core reading which strips out energy and food costs rose 0.3% (vs 0.2% expected). After a huge rally in US Treasury yields over the past couple of months, which is an indicator that the markets expect a strong economic rebound, many were looking to this as a possible reason to force the Federal Reserve to change its mantra, that the current increase in inflation was more entrenched than just "transitory" as the US recovers from the pandemic. Should it have printed closer to the 1% handle, then this could have been a reason for the Federal Reserve to reassess its policy outlook and look to withdraw its current stimulus measures sooner than expected to control runway price rises. The Federal Reserve has a dual mandate, to provide price stability and help facilitate maximum employment. It is currently more focused on the latter and willing to let the economy run a little hot and inflation above its annual target in an effort to get Americans back to work. Despite the higher than expected reading, this wasn't high enough for stock markets to get spooked that Federal Reserve support was going to be withdrawn anytime soon, so stocks rallied and the dollar was sold off as a result.

In other news, the one-shot Covid-19 vaccine offered by Johnson and Johnson has temporarily been withdrawn from use in America as a result of blood clots being reported after it has been administered. The withdrawal was out of an "abundance of caution" according to officials so they can look to analyse more data. It should be said there have only been six reported cases after more than 6 million jabs, so if a link is proven it is still extremely unlikely to affect anyone. The US is also far more dependent on the Pfizer and Moderna vaccines so the withdrawal of the J+J one will have limited impact on the US vaccination campaign.

EUR/USD trades at 1.1960 buoyed by the aforementioned weaker dollar and hopes that the EU is finally getting a grip on its own vaccination programme.

Expected Ranges

GBP/USD: 1.37 - 1.3855 ▲

GBP/EUR: 1.1480 - 1.16 ▼

GBP/AUD: 1.79 - 1.8060 ▼

GBP/NZD: 1.9365 - 1.9520 ▼

GBP/CAD: 1.7250 - 1.74 ▼