Some positive UK data to end the week
Friday 12 March, 2021
Daily Currency UpdateGBP - British PoundA plethora of UK data was released in the early hours of this morning which added fuel to the argument that the UK economy is firmly on its road to recovery after a successful start to its vaccination programme. GDP, Trade balance and services data all posted better than expected numbers, buoying hopes for a road to recovery post the lockdown in the UK. Industrial and manufacturing data remained very weak, suggesting Rishi Sunak, UK Chancellor, may still have work to do to provide stimulus to these ailing sectors. Vaccines took centre stage in the UK with Astra Zeneca's vaccine in the spotlight. A number of countries, including Denmark and Norway suspended the use of the jab after reports that a small number of people had developed clots after taking the vaccine while reports surfaced that a 50-year-old man had died in Italy after developing deep vein thrombosis (DVT) following a dose of the jab. However, the European Medicines Agency (EMA) has urged that "there is currently no indication that vaccination has caused these conditions, which are not listed as side effects with this vaccine."
Key MoversAll eyes were on the European Central Bank yesterday, with an announcement from its chief, Christine Lagarde, that there are plans to purchase bonds at a “significantly higher pace” over the next quarter. The decision was motivated by the recent rise in yields and concerns that “headline inflation is likely to increase in the coming months.” This decision shows a widening gulf between the Central bank in the Eurozone and the Federal Reserve in the US, who doesn't believe that any increase in bond yields and inflation is an issue. The euro weakened on the news initially but was later back to almost exactly the same position versus the US dollar, as economic projections from the ECB remained relatively strong. GDP and inflation forecasts were revised higher for 2020 and 2021 while there is an expectation the economy will expand by 4% and inflation to rise 1.5%. This could in fact hit 2% on a temporary basis it was stated. The US dollar continues to weaken versus its peers, with Biden's stimulus package due to be rolled out before the end of the month stoking risk appetite back into the market. The continued rise in US Treasury yields reflects the market's optimism. Today we see the release of US Producer prices and the University of Michigan’s consumer sentiment index, both expected to post strong numbers.
- GBP/USD: 1.3880 - 1.3965 ▲
- GBP/EUR: 1.1660 - 1.1700 ▲
- EUR/USD: 1.1860 - 1.1935 ▼
- GBP/AUD: 1.7780 - 1.8065 ▼