GBP: Watching the data tomorrow

EUR: Needs some good news for once

USD: Strong data opens up chance of US outperformance

Sterling

Sterling’s resilience against a resurgent USD is quite admirable and shows the level of support the pound has managed to garner in recent weeks. News this morning that coronavirus infections are falling fast across England with positive tests now less than one-third the level reported three weeks ago should go some way to supporting the pound further although whether the decline is as a result of the lockdown or the strong vaccination rate is up for discussion and therefore this is not a clear signal that the virus is in such a retreat that a swift end to the lockdown is a sensible plan.

Much like in Europe, the main data run is tomorrow with retail sales tomorrow morning as well as the latest PMI sentiment numbers. If business is shown to have pushed through Brexit concerns and are becoming acclimatised to the lockdown then tomorrow could be a very strong day for sterling.

Euro

GBPEUR broke through the 1.15 level yesterday as we sent out the morning update and, for the most part, that is where the pair has stayed. We await news from the European economy tomorrow in the form of the latest PMI sentiment numbers from manufacturing, services and construction sectors but we would not be surprised if the end result was further EUR weakness into the weekend.

US dollar

A strong retail sales report in a market of increasing inflation concerns was enough to push the USD stronger yesterday, heartening those in the investment community who believe that the US economy will keep or out pace the rest of the world in recovering from the pandemic.

This data certainly illustrates the power of fiscal support and the potential build-up of actual inflation pressures on the other. With Congress almost certain to pass additional stimulus soon and the Federal Reserve not wavering from its plan to keep interest rates low for a long time, you would have to say that these factors are unlikely to diminish any time soon.

To be abundantly clear, I was surprised the USD did not rally further on these numbers, but it will do should the data start to show further US outperformance.

Elsewhere

Emerging markets are taking the most recent bout of USD strength on the chin this morning. Interest rate increase bets are rising in South Africa as oil and wider energy prices rise despite the economic pressures there, while the Turkish central bank will be hoping they are able to hold rates at an eye-watering 17% this week given the recent decrease in credit growth.

Have a great day.