GBP: Can we break higher this time?

EUR: Recovers but vaccine rollout crucial

USD: Stimulus back on track at full assignment 

Sterling

Strong vaccine news and a generalised melt higher in risky markets is providing sterling with all the support it needs at the moment. With economic data not due from the UK until Friday morning – the preliminary reading of UK GDP in the Q4 – we have to expect that sterling will trade on wider risk appetite.

There are a couple of things to bear in mind; however, GBP/USD has failed 7 times to break meaningfully through the 1.3750 level in thee past month or so. Another failed attempt and we will be looking at prices back into the 1.36s in short order.

Euro

The single currency is back above the 1.20 level in EUR/USD this morning although this is more to do with the sell off in the USD than any EUR strength emerging. While we can look at European data and declare it to be either strong or weak, the most important vector for investors remains the rollout of the vaccine at which Europe remains woefully behind other Western areas.

US dollar

The focus is very much back on the USD this morning as Congress continues to work through passing a $1.9trn aid package that can support the US economy moving forward. Friday’s weak jobs report was enough to stop the strong-dollar-stimulus-can-be-cut crowd in its tracks with only 49,000 jobs being added in the whole of the US in January with major losses still being seen in sectors that are most affected by social distancing.

Inflation remains a concern and yields on US debt remain elevated, but these are no longer supporting the USD, instead pricing in the belief that the Federal Reserve will have to let inflation run higher for longer if they are to wait on the jobs market coming back to some semblance of normality before hiking interest rates.

All eyes are most definitely on Washington this week, but inflation figures on Wednesday afternoon will also guide overall markets.

Elsewhere

Commodity currencies are driving higher this morning as oil prices break the $60 a barrel mark. Investors are happy to keep buying up oil contracts on the belief that the global economic recovery is just around the corner and that will see increased demand. The correlation between oil prices and vaccine levels is strong too, so this trend could continue for a while yet.

Needless to say, currencies, like CAD, RUB, NOK, and IDR stand to benefit the most from this movement in the short term.

Market rates

Today’s interbank rates at 08:23 against Sterling. Movement vs yesterday.

Euro	€1.139 ↓
US dollar	$1.372 ↑
Australian dollar	$1.788 ↑
South African rand	R20.43 ↑
Japanese yen	¥144.8 ↑

Have a great day everyone.