Sterling on the front foot as COVID-19 dominates proceedings
Wednesday 5 January, 2022
Daily Currency UpdateThe start of the year has seen Sterling very much on the front foot versus its peers after COVID-19 related news dominated the markets. Risk appetite has been boosted in the last few days, after the World Health Organisation noted that more studies are showing that Omicron, the new variant of COVID-19, is producing milder symptoms compared to previous variants. Global stock markets were on the up, and currencies such as the pound are benefiting from investor appetite to take on more risk.
The market has also been buoyed by the UK taking a less firm stance on measures that could impede the UK economy. This differs to the Eurozone, where countries are considering partial shutdowns of the economy to impair the spread of the latest variant. Boris Johnson, UK Prime Minister, stated in a press conference yesterday, that the UK must try and 'ride out' the latest wave of Coronavirus, suggesting that the chances of harsher measures beyond the current 'Plan B' were less likely. This has helped the pound stay particularly strong versus the euro, where we were close to testing the psychological 1.20 figure yesterday.
Yesterday's UK PMI data also helped to spur on the pound, posting better than expected results. Growth was seen in all sectors including production, new orders, and employment.
Key MoversThe US dollar started yesterday's session on the back foot versus its peers. Again, this was in keeping with the notion that the market has an appetite for risk at the moment. We have the release of US employment data today, a pre-cursor to Friday's non-farm payrolls, which will be watched closely for signs of a buoyant US economy as it starts coming out of the pandemic. Expectations are for a strong reading on Friday, adding 426,000 jobs for the month of December, versus a posting of 210,000 last month.
We also saw OPEC meet yesterday, putting together a plan to increase output of oil by 400,000 barrels per day in February. This helped to weaken the US dollar and lower oil prices.
- GBP/USD: 1.3505 - 1.3570 ▲
- GBP/EUR: 1.1955 - 1.1990 ▲
- GBP/AUD: 1.8560 - 1.8725 ▼
- EUR/USD: 1.1285 - 1.1335 ▲