GBP: Holding on for reopening

EUR: Hits 1 year low vs GBP

USD: All eyes on payrolls

Sterling

Yesterday was ‘Freedom Monday’ and Brits are now allowed a little more freedom to spend time with family and friends. Sterling remains relatively unmoved by the whole deal although Boris Johnson’s restatement that the plan remains to lift all Covid-19 procedures within three months will provide some support.

Sterling is coming up against a resurgent USD but has room to push stronger against the EUR against which it made gains to the highest level in over a year. A couple of days above the 1.17 mark and people will start talking about a run towards 1.20 level especially if the news from Europe remains fixated on a failing vaccination plan.

Longer term issues around the pound remain but we think that the market will put those to one side until this period of vaccine focus is out of the way.

Euro

As noted above, the EUR fell to its lowest level in a year against the pound yesterday and could easily continue those losses in the coming sessions given the divergence in fortunes around vaccination and a reopening of wider economic services.

Similarly, conversations as to the ability of the euro to push back against the wider run of USD strength are coming to a simple conclusion; not likely. With economic data in the next few sessions set to confirm that the pace of the economic recovery in Europe is lagging far behind that of the US and UK, there is little reason for traders to want to hold the single currency.

US dollar

All eyes remain steadily focused on the payrolls report this Friday from the United States as the country benefits from a speedier vaccine drive, a deceleration of Covid-19 cases and easing lockdown procedures. Investors will be looking squarely at this jobs report for signs that the US economy is back and, without wanting to summon too many memories of Donald Trump, that the story of the recovery is “America First”.

Something like 9.5m jobs are still yet to be recovered from a year ago and so the US jobs market has a tonne of work to do to be able to say that it has recovered but this month’s announcement is the first I can remember that is arriving with such a low wave of optimism.

Optimism can be disappointed however with tomorrow’s and Thursday’s ISM numbers also likely to influence things.

The dollar has remained strong in the past 24hrs as the mood towards risk remains weak given the liquidation of some shares following the blow-up of an investment fund and large losses for some banks.

Elsewhere

The Japanese yen is in focus this morning as both risk aversion sees it strengthen and local retail sales boost confidence in the Japanese economy. In a recovery story, we cannot be long the yen – its use as a funding currency for wider investment is too strong – but today’s move provides interesting prices for JPY sellers.

Market rates

Today’s interbank rates at 09:05 against sterling. Movement vs yesterday.

Euro	€1.171 ↑
US dollar	$1.374 ↓
Australian dollar	$1.801 ↓
South African rand	R20.54 ↓
Japanese yen	¥151.4 ↑

Have a great day everyone.