Home Daily Commentaries Market jitters send dollar higher

Market jitters send dollar higher

Daily Currency Update

Positive coronavirus cases dropped to 5k yesterday in the latest official numbers, a fall of around 50% from the Monday before. Schools are set to open their gates to all students on Monday 8th March with all hoping that this goes smoothly to allow more businesses to open up on April 12th. Despite all this positive news, sterling has slipped back against the dollar as jittery stock markets, driven by a huge sell off in bonds, continues to see money flow towards the safety of the US dollar.
This week’s main event will be tomorrow’s annual Budget from the Chancellor of the Exchequer, Rishi Sunak, with him due to address the commons just after Prime Minister’s Questions. Ongoing support is expected to be a key message that Sunak will be keen to get across to the nation as it emerges from the worst of the pandemic and businesses look to rebuild as we head towards Spring/Summer.

Its likely personal tax rises will not be on the agenda this time as the Chancellor will be looking to inject some confidence to a nation that has been economically battered over the past year. Budgets of recent past haven't really moved currency markets however it will be interesting to see if this one, likely the most important one of modern times, is any different.
Sterling is looking a bit weaker versus the dollar with GBP/USD around the 1.39 handle. GBP/EUR is tracking sideways and sits at 1.1560.

Key Movers

As mentioned before, the dollar is gaining from risk off trade as well as growing expectations that we could see a strong recovery in the US, aided by the imminent signing off of President Joe Biden’s $1.9t stimulus package. It includes direct cash payments to those poorer members of society. The US's vaccination programme pushing ahead well, combined with Biden’s huge support package, is being seen as a precursor to a potential uptick in US inflation which in turn could see the US Federal Reserve look to tighten policy sooner than previously thought.

A hike in rates is not on the agenda anytime soon, however a tapering of its asset purchases and when this may begin is the main talking point. Some are eyeing that the Fed will look to reduce the pace of its balance sheet expansion by December. The Fed is remaining tight lipped on the subject and will no doubt be wanting to see the pandemic put to bed before changing its current stance.
EUR/USD is firmly back in the spotlight at present with it making another play for 1.20 as the risk off moves combined with the disparities in the pace of Covid jabs between the US and the EU put pressure on the single currency. Data-wise it’s a pretty quiet day with no top tier releases scheduled. Coronavirus news and developments re: the US stimulus package will be the main areas of interest before all eyes turn to the monthly US Jobs report due on Friday. EUR/USD currently trades at 1.2005 and USD/JPY up to 106.90.

Expected Ranges

  • GBP/USD: 1.3790 - 1.3930 ▼
  • GBP/EUR: 1.15 - 1.16 ▼
  • GBP/AUD: 1.7830 - 1.80 ▼
  • GBP/NZD: 1.9145 - 1.93 ▼
  • GBP/CAD: 1.7545 - 1.7675 ▼