The Pound is attempting a comeback after strong economic data and reopening optimism support the bullish long-term outlook. So far this week the Pound has been one of the best performing G10 currencies.
Whilst plans to allow the UK economy to reopen completely are expected to lead to a rise in Covid cases, the UK government remains confident that hospitalisations will remain low after the success of the vaccination roll out. The Pound has reacted favourably to the news, further lifted by impressive economic data over the last few weeks.
Last Friday, the US Dollar gave back some ground after US employment figures (non-farm payroll) revealed an unexpected rise in the unemployment rate and a miss on wage growth expectations which has eased market fears of an earlier interest rate hike by the Fed.
Yesterday saw strong PMI data out of the Euro zone, however investors largely overlooked this and it seems their main focus is on how quickly they will be able to ease lockdown measures in Europe. For now, Sterling has the edge over the Euro on this, which is keeping the GBP/EUR buoyant for now. Although, as time moves on this advantage may fizzle out as Europe’s vaccination programme catches up.
As a result, the GBP/EUR is close to a 3-month high having climbed nearly a cent from Friday’s low. The GBP/USD has also claimed back a cent from Friday’s low, bouncing back from last week’s two month low, but continues to trade at relatively subdued levels. The EUR/USD remains at lower levels (around 1.18) which is down nearly 4-cents from last month’s high.