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26/05 – The trend is your friend

GBP: Indian variant remains a risk

EUR: Gradual increases

USD: Not helped by global progression


Sterling may be starting to feel a slight chill from the Indian variant of Covid-19 that is continuing to spread in some parts of the UK. Stories about national versus local government confusion over increased lockdown procedures will have contributed to a little bit to the sterling weakness yesterday.

Government communications so far have been clear: the vaccines that the UK populace are receiving are able to protect against this variant as well as others. It is therefore our belief that sterling does not deserve that level of weakness although risks to the reopening obviously remain.

As we pointed out yesterday, Dominic Cummings’ testimony to parliament begins at 09.30 this morning and we would be on the lookout for sterling volatility through the headlines that he is likely to reveal.


In the short term, we believe that the broad weak USD environment will allow the EUR to maintain its level of strength exhibited in previous weeks. ECB speakers are not on a path yet to offer the euro strength but if they can refrain from weakening it then further gains from the single currency look likely.

US dollar

Without much data out at the moment, markets are very much in a trend-following mood. For the USD that means weakness that is unlikely to fall away unless the US economy hiccups – and markets believe the global recovery is slowing – or inflation puts the Fed in a position where they have to say something around tightening.

Neither of those look particularly likely in the short term and we think investors will lean into the weaker USD.


Given its outperformance in stopping/eliminating the virus the New Zealand economy was one of our first picks to outperform in 2021 and see its central bank hike interest rates. Communications overnight suggest that while this may not happen until next year, this is still a lot sooner than other economies and the NZD should remain an attractive investment destination as a result.

Market rates

Today’s interbank rates at 08:17 against sterling. Movement vs yesterday.

Euro€1.155 ↓
US dollar$1.413 ↓
Australian dollar$1.817 ↓
South African randR19.56 ↓
Japanese yen¥153.9 ↓

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Jeremy Thomson-Cook

Jeremy Thomson-Cook

Jeremy has over 13 years experience working in the FX industry. As a specialist in political risk mitigation and currency hedging, he regularly advises clients on the day-to-day moves of the markets and the implications of fiscal and monetary policy on international businesses.