US Dollar

Weekly Update: Pound Surges to Multi-Month Highs on Reopening Optimism, US Stimulus Setback Revives the US Dollar

The Pound got off to a strong start this week, amidst optimism over the reopening of the UK economy, before falling victim to some profit taking as the month came to an end.

At the same time, after struggling through most of the week, the US Dollar rebounded when US stimulus delays soured market sentiment.

Pound Undermined by Profit Taking

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

GBP/USD – Down one cent on the week’s opening levels

The Pound extended its bullish run again this week, climbing to new multi-month highs as GBP investors’ reopening hopes were bolstered by Boris Johnson’s unveiling of his roadmap out of lockdown.

However, Sterling proved to a victim of its own success, dipping from its best levels towards the end of the week as it fell due to some end of month profit taking.

In the spotlight next week, we have the publication of Chancellor Rishi Sunak’s 2021 Budget. This may help to resume the Pound’s positive trajectory if the Chancellor extends the government’s fiscal stimulus as forecast.

Euro Supported by USD Weakness

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

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

The Euro’s negative correlation with the US Dollar helped the single currency to trend positively this week, with EUR exchange rates enjoying a particularly strong bump in the latter half of the session on some upbeat economic data.

However, it wasn’t all plain sailing for the Euro as it faced some pressure due to ongoing concerns over the EU’s vaccine rollout.

In the spotlight next week will be the release of the Eurozone’s consumer price index, where another healthy inflation reading could provide some support for the Euro.

US Dollar Fluctuates amidst Mixed Market Sentiment

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

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

The US Dollar initially fell back this week in response to dovish comments from Federal Reserve Chair Jerome Powell, in which he reinforced the Fed’s current dovish bias.

However, the safe-haven currency was able to claw back the majority of its losses towards the end of the week as a delay to Joe Biden’s stimulus package soured market sentiment.

Turning to next week, the focus for USD investors will be on the latest non-farm payroll figures. Will another lacklustre expansion of the US jobs market put more pressure on the US dollar?

Australian Dollar Rally Curtailed by Souring Risk Appetite

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

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

The Australian Dollar maintained a positive trajectory through much of this week’s session, bolstered by a prevailing risk-on mood and a stronger-than-expected rise in Australia’s Wage Price Index in the last quarter of 2020.

However, the ‘Aussie’ then relinquished most of these gains after a notable souring of risk appetite in the tail end of the session.

It’s set to be a busy session for AUD investors next week, with both the Reserve Bank of Australia’s latest rate decision and the latest domestic GDP figures to contend with.

Key Data

Mar 01 EUR German Inflation Rate (Feb)

Mar 01 GBP Manufacturing PMI (Feb)

Mar 01 USD ISM Manufacturing PMI (Feb)

Mar 02 AUD RBA Rate Decision

Mar 02 EUR Inflation Rate (Feb)

Mar 03 AUD GDP (Q4)

Mar 03 GBP Services PMI (Feb)

Mar 03 GBP 2021 Budget

Mar 03 USD ISM Non-Manufacturing PMI (Feb)

Mar 04 AUD Trade Balance (Jan)

Mar 04 EUR Retail Sales (Jan)

Mar 05 USD Non-Farm Payrolls (Feb)