09/03 – GBPEUR close to highs of the year

Jeremy Thomson-Cook
Jeremy Thomson-Cook 09 March 2021

GBP: Beating up on the euro

EUR: ECB can’t come quick enough

USD: Fresh three month highs

Sterling

Unless you work at Buckingham Palace, the last 24hrs have been pretty quiet in the UK with the pound following suit. That being said, sterling is breaking higher against the beleaguered euro and is looking to push through its year-to-date highs of 1.1714.

Governor Bailey’s speech pushed back a little on the notion that the next move in rates from the Bank of England would definitively be higher but the market ended up focusing on comments that warned of concerns over rising inflation; music to a currency investor’s ears.

We expect the pound to continue to beat up on the single currency into the ECB meeting on Thursday.

Euro

Yesterday’s thoughts of a weaker euro have become reality with the single currency losing ground across the board ahead of Thursday’s European Central Bank meeting. We expect that to continue although markets may be concerned about being overly long the USD after its recovery of the past few weeks.

US dollar

With the Biden stimulus plan set to break through the political impasse and become law within the next week and the yields on US debt rising to near the highest levels of the year, the USD is once again back in the limelight. Investors remain happy to trade out of haven currencies like the yen into the USD and will sell higher risk currencies – emerging market currencies for example – given the security and the yield that the USD is currently paying.

If dollar data continues to outperform and amplify the market narrative of a recovering US economy powering ahead of all and sundry then we’re in for further USD outperformance.

Elsewhere

Our calls last week for a break lower for the Japanese yen have been realised and should continue in the coming weeks should the narrative of a quickening global recovery be maintained. Yen is under pressure courtesy of its haven status but also the news that the vaccine roll out in the country has been painfully slow.

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Market rates

Today’s interbank rates at 08:20 against sterling. Movement vs yesterday.

Euro €1.166 ↑
US dollar $1.386 ↑
Australian dollar $1.805 ↑
South African rand R21.32 ↑
Japanese yen ¥150.9 ↑

Have a great day everyone.