GBP: Needs more support to break $1.40

EUR: Fails to break 1.19

USD: Risk assets help dollar decline

Sterling

Sterling has been the one of the best performers in the G10 this week, pushing higher against the US dollar by around 1.5%. While most of this will be down to the belief that Covid-19 case numbers hospitalisations are heading in the right direction, we also have a Bank of England meeting next week to contend with.

Rate expectations are starting to increase once again, but we also have to remember that a lot of the GBP move in the past week has been as a result of the USD depreciation and not GBP strength; if we want to see prices above the 1.40 level then we’ll need a hawkish Bank of England meeting next week.

Euro

German inflation expectations and stronger investment attitudes elsewhere were enough to push the EUR higher yesterday and although EURUSD managed to touch the 1.19 level, it was unable to break it.

Today’s focus will fall on local GDP announcements – France, Germany etc – and while most will have improved in recent months and allowed the Eurozone to exit its technical recession, these numbers are not likely to move the needles when it comes to rate expectations from the ECB and shouldn’t drive too much EUR strength.

USD

The dollar is a messy currency at the moment and has continued its declines of the past few days as the story in Chinese/Hong Kong stocks has calmed slightly and allowed investors who bought the dollar as a haven from these moves to exit their positions, moving the USD lower.

This story is not over however and equity market losses in Asia and Europe may still come through to support the USD. Our longer-term belief remains that the USD is overvalued at these levels but with so much going on, and an uncertain picture of Fed expectations, there is still room for USD depreciation.

Elsewhere

In these messy times, commodity currencies are starting to recover from their risk-averse lows that were seen in the earlier part of the week. Virus cases are still high however and with vaccination take up low, there is a lot of ground to cover before these currencies are out of the woods.

Market rates

Today’s Interbank Rates at 09:03 against sterling. Movement vs yesterday.

Euro	€1.174 ↑
US dollar	$1.396 ↑
Australian dollar	$1.889 ↑
South African rand	R20.34 ↓
Japanese yen	¥152.9 ↓

Have a great day and a better weekend.