GBP: No help forthcoming
EUR: Should take 1.20 today
USD: Crucial retail sales figures this afternoon
Sterling
Sterling has traded lower once again overnight and sits below the 1.15 mark in GBPEUR. A wider belief of GBP outperformance is largely predicated on continued strong economic expansion in contrast to issues elsewhere but that is just not stacking up at the moment.
Until economic data improves here or worsens elsewhere, sterling will have to fend for itself.
Euro
Focus is already shifting from the key data of this week to that coming down the track next week, with the ECB meeting front and centre. Given both an increase in global sentiment but also falling bond yields, the pressure on the ECB to do anything dramatic at next week’s meeting is light. At last month’s meeting the central bank agreed to speed up its stimulatory bond purchases under its PEPP programme and that should keep the market sated for now.
We expect the euro to remain strong into next week as a result.
US dollar
Despite a super strong retail sales reading yesterday from the US, markets are stuck in a holding pattern. It seems strange to me that a near 10% increase in sales on the last month could have been priced in and already discounted by the markets but that is how both USD and equities performed over the course of yesterday’s session.
Maybe markets are more scared of vaccine delays than they are letting on, allowing central banks increased wiggle room to keep stimulus running? Whatever is going on, markets are more nervous than the data warrants, possibly pointing to a larger risk-off move to come, and subsequent USD strength.
Elsewhere
Strong Chinese growth overnight initially helped risk assets before traders refocused on weaker industrial output numbers. A GDP figure showing 18% growth in a quarter is normally cause for celebration but given the base effects of how weak the Chinese economy was in Q1 last year and the ongoing issues around global trade hint that industrial production has a way to go before hitting full speed.
Risky currencies are mixed after the news.
Market rates
Today’s interbank rates at 08:27 against sterling. Movement vs yesterday.
| Euro | €1.148 ↓ |
| US dollar | $1.374 ↓ |
| Australian dollar | $1.775 ↓ |
| South African dand | R19.49 ↓ |
| Japanese yen | ¥149.6 ↓ |
Have a great day and better weekend.
