21/04 – Dollar recovers as global shares fall

Jeremy Thomson-Cook
Jeremy Thomson-Cook 21 April 2021

GBP: Can only do so much on its own

EUR: Political news in Germany one to watch

USD: Bought as equities fall

Sterling

Sterling’s run to $1.40 was short lived as global risk sentiment has swooned overnight courtesy of continued fears that while the UK and US may be powering ahead with their vaccine efforts, the rest of the world is not. 

Despite the provisions of vaccines, Europe is the only place where infections are currently falling with rampant spreads in India and Brazil driving case numbers in Asia and South America respectively.

The fear therefore remains that all the good work that has been done by the UK government could be undone by porous borders that allow for vaccine-resistant strains of the virus to enter the UK populace. Sterling can’t really fight too much against that for now and we just hope that the inevitable strong data from the UK that is forthcoming in the coming month or so isn’t wasted during a period of viral uncertainty.

Euro

The euro has also managed to stay relatively upbeat in the past 24hrs despite the slide in global sentiment with political matters helping the single currency.

Polls released yesterday show that Angela Merkel’s CDU/CSU party may struggle to hold on to power in German in the coming elections with the Greens now in the lead. A win for them would likely cause a repricing of German debt – and the euro as a result – as the market reacts to policies that are likely to see further government spending, advancing European integration and plans designed to engender growth for the long term – similar to the plans in the US from the Biden administration.

It’s very early days but this is a story we will have to watch for a while.

US dollar

The dollar is not the greatest haven of them all – that accolade falls to the Japanese yen – but a broad sell-off in equities yesterday caused the dollar to break its streak of losses and advance on the session.

Earnings season is kicking off in the US at the moment and so far the numbers have been largely encouraging, which should allow for further USD weakness in the coming days although the dollar’s strength against commodity currencies may continue for a while; President Biden is due to open a climate summit later this week which should see him push for green alternatives whilst the US House Judiciary Committee pushed through a bill that would allow the Justice Department to go after OPEC members on the basis that the oil market is a monopoly.

There is no US data today of note.

Elsewhere

Eyes will fall on the Bank of Canada this afternoon for their latest policy meeting that should see them reduce the amount of debt that they are purchasing as part of their stimulus plans, a hint that they are more comfortable with the Canadian economy than they had been before. Some believe the Bank could also signal a rate hike at some point next year – they are currently talking about 2023 – although the recent upsurge in Canadian Covid cases may put pay to that.

Market rates

Today’s interbank rates at 07:46 against sterling. Movement vs yesterday.

Euro €1.159 ↓
US dollar $1.394 ↓
Australian dollar $1.806 ↑
South African rand R19.89 ↑
Japanese yen ¥150.6 ↓

Have a great day everyone.