22/04 – ECB the highlight of a quiet day

Jeremy Thomson-Cook
Jeremy Thomson-Cook 22 April 2021

GBP: Stability is crucial

EUR: ECB meeting at 12.45, with press conference at 13.30

USD: Biden speech on environment may move oil

Sterling

Yesterday’s inflation number added to the general market belief that while inflation pressures are likely coming in the UK, they are not here yet and hence the lack of follow through for the pound. In the short term, we see the relative stability that the pound is currently showing as a positive and may be as much a sign that the worst days are over for the pound for moment as anything.

That being said, for GBPUSD to break above the 1.40 level we may need to see moves elsewhere – particularly in EURUSD – as a catalyst for greater USD losses.

Euro

It’s ECB day today and while there is a still long way to go, there are reasons for optimism with the Eurozone that the single currency, unfortunately, will largely ignore.

In the longer term our calls for a EURUSD price back above 1.20, and maybe towards 1.25, are still in place but we do not see much reason why the ECB wants to push things higher quite yet. On the other side of the coin, the ECB is unlikely to pressure the euro too much today given its policy announcements last month and the improving vaccine and economic news in the area.

GBPEUR should stay relatively quiet too with most of the focus on the USD given overall risk conditions.

US dollar

The dollar story of the past few days has been of concerns that equity markets are overvalued and that the breadth of the rally that has been in place essentially since last summer is starting to falter. While we are unlikely to see much development on that today with earnings season in the US and Europe, the dollar will likely focus on comments from Biden at today’s climate summit with its impact on oil markets the main focus.

Elsewhere

Given the moves in risk in the past few days, it’s too early to stop keeping an eye on the yen. GBPJPY and EURJPY are bumping up against important levels with a continued feeling of risk aversion likely to see the yen strengthen further.

Market rates

Today’s interbank rates at 08:59 against sterling. Movement vs yesterday.

Euro €1.157 ↑
US dollar $1.393 ↑
Australian dollar $1.796 ↑
South African rand R19.83 ↑
Japanese yen ¥150.3 ↑

Have a great day everyone.