GBP: Vaccine and spending news a great help

EUR: Stronger inflation helps before ECB

USD: Unsupported as traders buy risk

Sterling

Sterling is back above the 1.40 mark against the USD for the first time in a month after a strong day across the board. Once again, there are numerous reasons why sterling seems to be moving higher; strong real-time data suggesting that we have returned to shops and the hospitality sector in our droves alongside the news that the take-up of vaccines for those over 50 in the UK is running at 94%.

All of this points to a sugar hit of spending in the short term which we think the market will jump on in the short term to bolster the pound. Today’s employment data is pretty stale but tomorrow’s inflation number will have people watching for a sign that price pressures are creeping higher as businesses feel more comfortable protecting their margins.

A little bit of consolidation around 1.40 would not be a bad move for the pound but wider dollar weakness may exacerbate this move in the short term.

Euro

Stronger German producer price inflation this morning is the kind of thing that the ECB is going to be looking for when it talks about inflation pressures within the Eurozone. Whilst one swallow doesn’t make a summer, the euro has rallied on this news as traders may be getting a sense that the EU/US divergence that has so favoured the USD in the past few months is definitively coming to an end.

US dollar

The dollar has now had its longest run of daily losses since June of last year, with expectations that the US exceptionalism that was the hallmark of the first quarter has come to an end. Yesterday we noted that a low volatility environment may be enough to prompt some dollar selling but were surprised to see such a move come around so quickly.

Those who sold the dollar in Q1 got burnt and so we expect those trying a similar tact in Q2 to be cautious; this means USD losses will likely come slower than they have done previously.

Elsewhere

AUD and other commodity currencies have moved higher this morning as the generalised positive sentiment that other markets are feeling has flowed through to the world of currency. AUD and NZD will likely need further improvements in Chinese data before driving too much higher from here but are eagerly poised.

Market rates

Today’s interbank rates at 08:59 against sterling. Movement vs yesterday.

Euro	€1.159 ↑
US dollar	$1.398 ↑
Australian dollar	$1.792 ↑
South African rand	R19.92 ↑
Japanese yen	¥151.6 ↑

Have a great day everyone.