Daily Currency Update

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No news appears to be good news for the Pound

GBP - British Pound

No news was probably good news for the UK this week as the pair quietly trended upwards. 1.40 will be an important resistance level that is unlikely to break before the weekend. All eyes are on next week's Bank of England monetary policy announcement and the US non-farm payrolls report scheduled for release, which will both have an impact on GBPUSD and what could be next for the currency pair.

The UK's impressive vaccine progress should translate into a quicker than expected re-opening of the economy which should in turn spur strong economic growth and boost further job prospects. Latest unemployment figures are positive with it falling to 5% with the employment rate in the three months to January estimated at 75% - a touch lower than the prior quarter.

However, as with the US, the market will now be trying to predict what the Bank of England is thinking down the line. Will it continue to keep a very loose monetary policy for the foreseeable future, allowing the economy to heat up post the pandemic and send inflation soaring above the 2% target, or will it be forced to act sooner than anticipated in tightening policy and raising interest rates to stop inflation spiralling out of control?

The market at the moment appears to be focusing on the former of those two, but any talks of rate hikes or removal of the bond buying programme could see Sterling gain some serious momentum.

Key Movers

The Euro has performed well this week against both the US dollar and the pound. Despite ongoing partial lockdowns, the latest Eurozone consumer and business confidence indicators released yesterday suggested a renewed optimism in the single bloc.

With the vaccination programmes across the single area gaining momentum, positive data is only renewing investor's expectations that the Eurozone is the latest economy to see the benefits of a major rebound. The 'vaccine trade' that saw the pound become one of the best performing currencies in the G10 in the first quarter of this year, now firmly moved to the euro, we could see the euro have a strong second quarter.

Germany and the rest of the euro area will be releasing their Q1 GDP data today. German QoQ GDP is forecasted to contract by 1.5% in Q1 of this year compared to a result of 0.3% in Q4 of 2020, while the euro area is forecasted to contract by 0.8% compared to -0.7% in Q4 of 2020. Preliminary inflation estimates for the eurozone for April are predicted to show an increase in the headline CPI index from 1.3% to 1.6%. Core CPI is expected to drop on the other hand.

Upbeat US GDP data in the US has helped the US dollar remain stable. Q1 GDP data came in at an impressive 6.4%. On the whole, recent economic data out of the US continues to point towards a solid recovery.

Expected Ranges

GBP/USD: 1.3860 - 1.3925 ▼

GBP/EUR: 1.1465 - 1.1515 ▼

EUR/USD: 1.2075 - 1.2130 ▲

GBP/AUD: 1.7780 - 1.8090 ▼