pound receeding

Weekly Update: Pound Soars as BoE Dismisses Negative Rates, US Dollar Strengthened by Rising Treasury Yields

The Pound received a boost this week as the Bank of England (BoE) indicated that negative rates are unlikely to be used during the currency monetary easing cycle.

At the same time, the US Dollar enjoyed a bullish streak this week, with the currency rising in step with US Treasury yields amidst optimism for a strong US economic recovery.

Pound Surges as BoE Dismisses Negative Interest Rates

GBP/EUR – Up two cents on the week’s opening levels

GBP/USD – Unchanged on the week’s opening levels

Ongoing optimism over the UK’s vaccine rollout saw the Pound receive support through the first half of this week’s session.

However, the majority of Sterling’s gains were focused in the latter half of the week after the Bank of England (BoE) signalled that negative interest rates are not on the table during the current cycle of monetary easing.

Coming up next week, the publication of the UK’s latest GDP figures will be in the spotlight for GBP investors, with confirmation of a contraction of growth in the last quarter of 2020 likely to send the Pound lower.

Euro Slides on EU’s Vaccine Woes

EUR/GBP – Down one pence on the week’s opening levels

EUR/USD – Down two cents on the week’s opening levels

The Euro faced sustained losses over the past week, with the currency even falling below $1.20 against the US Dollar as the single currency was hounded by concerns over the EU’s slow vaccination rollout.

While both the Eurozone’s latest GDP and inflation releases printed above expectations, this failed to provide a boost for EUR.

Looking ahead to next week, the Euro may continue to face an uphill battle as the EU’s vaccination struggle is likely to stoke concerns over the Eurozone’s potential for an economic recovery this year.

US Dollar Surges in Step with Treasury Yields 

USD/GBP – Unchanged on the week’s opening levels

USD/EUR – Up one cent on the week’s opening levels

The US Dollar enjoyed a bullish run this week as the currency was supported by a jump in US Treasury yields.

This rise in yields was triggered by optimism over Biden’s next coronavirus stimulus package as well as some upbeat PMI and employment figures, which helped fuel hopes for a swift US economic recovery later in the year.

Turning to next week, the focus for USD investors will be on the latest US consumer price index, where the continued acceleration in inflation could help to extend the US Dollar’s gains.

Australian Dollar Fluctuates Following Dovish RBA

AUD/GBP – Unchanged on the week’s opening levels

AUD/USD – Unchanged on the week’s opening levels

The Australian Dollar traded in a wide range over the past week, with the ‘Aussie’ initially retreating after a dovish surprise from the Reserve Bank of Australia (RBA) as it opted to expand its quantitative easing programme this month.

AUD exchange rates were then able to recoup some of its losses through the second half of the week, aided by an unexpected rise in Australia’s latest trade surplus.

Looking ahead, the publication of Australia’s latest business and consumer confidence figures will be in focus next week, with the ‘Aussie’ potentially firming if sentiment continues to improve.

Key Data

Feb 8 EUR German Industrial Production (Dec)

Feb 9 AUD Business Confidence (Jan)

Feb 9 EUR German Trade Balance (Dec)

Feb 10 AUD Consumer Confidence (Feb)

Feb 10 USD Inflation Rate (Jan)

Feb 11 USD Initial Jobless Claims (6/Feb)

Feb 12 GBP GDP (Q4)

Feb 12 GBP Business Investment (Q4)

Feb 12 GBP Trade Balance (Dec)

Feb 12 GBP Industrial Production (Dec)

Feb 12 USD Michigan Consumer Sentiment (Feb)