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Pound hits highest level in 3 years

USD - United States Dollar

The British pound hit $1.40 for the first time in almost three years in overnight trading before the British government published its retail-sales figures. January retail sales decreased 8.2% from December. The US economy and the US dollar have been going in a separate direction. Jobless claims were unchanged. And the Flash Manufacturing PMI, a survey of 800 purchasing managers, reported the sharpest increase since March 15. The US dollar has responded with a decrease in demand against the euro, the pound, the Australian dollar, and the Canadian dollar.

Key Movers

After a sharp sell-off in EURUSD on Wednesday, the pair recovered slightly yesterday heading back towards the $1.21 handle. The uptick we saw in the Dollar, following on from the impressive US retail sales figures was short lived. The selloff in the Dollar was supported by the Philadelphia Fed manufacturing index, which beat expectations, however activity slowed from the previous month.

The British pound rallied again yesterday, as GBPUSD pushed back towards $1.40 handle and GBPEUR traded comfortably above the €1.15 handle, its highest level in over a year. This is expected to continue as investors bet on the UK unlocking its economy far sooner than the Eurozone and US as the pace of the UK vaccinations continues.

The Australian dollar again offered little to excite investors through trade on Thursday, failing to break outside recent ranges and continuing to bounce between 0.7730 and 0.7790 despite improved labor market conditions. Employment data showed employment levels are returning to near pre-pandemic levels, with the unemployment rate falling below 6.5% to 6.4% as another 30,000 jobs were added to the economy. The outlook continues to improve with most industries now reporting almost full employment, with job losses now targeted to those worst hit by the pandemic, namely tourism and entertainment. As the vaccine roll-out begins this month, there is hope forward indicators will show further growth moving into Q2, easing pressure on the RBA to maintain long run QE programs.

Expected Ranges

EUR/USD: 1.207 - 1.214 ▼

GBP/USD: 1.394 - 1.403 ▼

AUD/USD: 0.774 - 0.787 ▼

USD/CAD: 1.259 - 1.271 ▼