GBP: Helped by weak USD
EUR: Recovers but vaccine rollout crucial
USD: Stimulus back on track at full assignment
Finally, sterling has managed to push through the 1.3750 level in GBPUSD terms and now we will have to wait and see whether investors believe that the price deserves to stay at current levels, the highest since April 2018. We must be at pains to emphasise that the movement that we are seeing is more to do with a weak USD than a strong GBP, but as long as markets are dialled into stimulus, lower virus cases and a greater rollout of the available vaccines then this trade will continue to push higher.
EUR/USD has been rescued by a weak USD but for the single currency to have the impetus to move higher on its two feet will need encouraging vaccination news and that is not forthcoming currently. Should Europe get its act together and the economic news from China continue to improve then the euro should be seen in a more positive light, but for now, others are definitely preferred.
The increasing likelihood that the US will vote through a large stimulus package by the middle of March is continuing to underpin a wider rally in equities and global risk that has set the USD lower for the third consecutive day. Everything stems from this and will continue to, whether the plan goes through or not.
Should tomorrow’s CPI releases show a continual weakness in prices then there is no reason for markets to not continue to sell the USD on both interest rate and current account differentials, which should grow as time goes on.
Alongside the pick up in oil related commodity currencies, NZD had a good day yesterday. Traders drove the New Zealand dollar higher as local inflation expectations rose to the highest since the beginning of the pandemic. Following the Reserve Bank of Australia’s decision to extend its QE program last week, the RBNZ has become the front runner for the central bank that will raise interest rates first in the G10.
Today’s Interbank Rates at 08:13 against Sterling. Movement vs yesterday.
|US dollar||$1.378 ↑|
|Australian dollar||$1.785 ↑|
|South African rand||R20.43 ↑|
|Japanese yen||¥144.4 ↑|
Have a great day everyone.