Today’s Rates

GBP>EUR – 1.1569

GBP>USD – 1.3931

EUR>USD – 1.2038

GBP>CAD – 1.7695

GBP>AUD – 1.8021

GBP>SEK – 11.781

GBP>AED – 5.115

GBP>HKD – 10.804

GBP>ZAR – 21.066

GBP>CHF – 1.2688

Today’s Highlights

• GBP/USD retreats below 1.4000, UK/US PMIs in focus
• EUR/USD trims gains below 1.2100 ahead of German CPI
• US Dollar Index struggles for direction just below 91.00 ahead of ISM
• Gold Price Analysis: Key resistances for XAU/USD are located at $1,780 and $1,800

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Markets

GDP

The pound has traded mixed, gaining on the dollar, euro, and yen, but losing ground against the dollar bloc. Cable posted a high at 1.3999 before settling nearer 1.3950, which is still well up on Friday’s low at 1.3887. The UK government, which is preparing its annual budget (to be presented this Wednesday), signalled that the prospect of a strong growth rebound is limiting the need for large tax rises. The speedy rollout of COVID-19 vaccinations has been attributed to the brightening outlook for the UK economy, and recent outperformance in the pound.

World

The dollar has corrected some of Friday’s gains amid a recovery in risk appetite in global markets, which has come as bond yields retreated. The DXY dollar index has posted a low at 90.69, down from Friday’s 11-day high at 90.97, while EUR-USD concurrently lifted to a high of 1.2101, up almost 40 pips from the 11-day low that was seen on Friday. Despite the generally softer tone of the dollar, yen underperformance floated USD-JPY, which tested Friday’s seven-month high at 106.70. Yen crosses traded firmer, too, which recouped some of the lost ground that was seen during the heightened spate of risk-off positioning last week. The Japanese currency has recently been trading at major trend lows against most currencies thanks to the relatively rooted JGB yields, which has seen differentials versus other sovereign yields tip markedly out of the currency’s favour. The biggest movers so far today have been the Australian and New Zealand dollars, which outperformed after underperforming markedly last week. AUD-USD gained over 0.7% in posting a high at 0.7774, recovering a portion of the sharp, more than the 3-big-figure loss that was seen at the tail end of last week. USD-CAD dropped to a 1.2673 low, down nearly 80 pips from Friday’s peak at 1.2751, aided by a 2%-plus rise in oil prices. Front-month WTI futures posted a high at $62.92, up over $1.50 from Friday’s low but remaining comfortably below the 13-month peak that was seen last Thursday at $63.81. The pound has traded mixed, gaining on the dollar, euro and yen, but losing ground against the dollar bloc. Cable posted a high at 1.3999 before settling nearer 1.3950, which is still well up on Friday’s low at 1.3887. In news, the House of Representatives passed the Democrats $1.9 tln stimulus package at the weekend, as expected. The stage is set for a hand-off from monetary stimulus to fiscal stimulus, which is likely to the source of ongoing indigestion in bond markets, although the prospect for stronger corporate earnings should still carry stocks higher, especially cyclicals (growth stocks, such as tech, will be more sensitive to the erosion in the present value of future expected cash flows in a rising rate environment). The UK government, which is preparing its annual budget (to be presented this Wednesday), signalled that the prospect of a strong growth rebound is limiting the need for large tax rises.

XE Market Analysis Europe – 01st March 2021

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