14/06 – Sterling stable ahead of Covid-19 delays

Jeremy Thomson-Cook
Jeremy Thomson-Cook 14 June 2021

GBP: ‘Freedom Day’ delayed 

EUR: Waiting on Wednesday’s Fed meeting 

USD: Not getting volatile anytime soon

Sterling

Market consensus has shifted overnight to take into account the wider belief that the UK government will extend its current rules on Covid-19 for another 4 weeks in order to combat the spread of the so-called Delta variant of the virus.

With risk assets widely supported globally and data due from the UK economy this week that should show a strong level of economic activity, we expect sterling to remain resilient. Bank of England Governor Andrew Bailey speaks at 2pm BST this afternoon and his comments may be enough to help sterling higher given his recent optimism on rates.

Euro

The fallout of last week’s ECB meeting has been a euro that is a little softer than it was a week ago. While there are some currencies that are able to move higher against the USD courtesy of the belief that their central bank will raise rates ahead of the Fed – Australia, New Zealand, Norway, maybe the UK – the euro is not one of them, and hence the slightly dull drift in euro markets.

The Fed meeting on Wednesday will shape the euro this week with hopes that the dollar weakness continues to lift other currencies higher.

US dollar

Friday afternoon saw investors buying the USD ahead of the G7 meeting and that has continued a little overnight with Chinese and Australian bank holidays limiting the movement in Asia. We expect Wednesday’s Fed meeting will continue the broad trend in currency markets of dollar weakness. In fact, we do not expect that this Fed meeting will be the one that upsets markets given everyone seems pretty chilled that the need for a reduction in stimulus by the end of this year.

Elsewhere

Oil has hit a near 3 year high overnight, supporting commodity currencies as investors continue to remain bullish on travel and industry as vaccines to Covid-19 roll out around the world. We expect NOK and RUB to be the main beneficiaries in the short term.

Market rates

Today’s interbank rates at 08.23 against sterling. Movement vs yesterday.

Euro €1.165 ↑
US dollar $1.410 ↓
Australian dollar $1.831 ↑
South African rand R19.38 ↑
Japanese yen ¥154.7 ↓

Have a great day.