The Dollar was definitely King over the last week- with strength going into the greenback preventing any real meaningful strength into Sterling and Euro. The main topics over the last week was vaccinations and lockdowns, predominantly the use of the Astra Zeneca vaccine which was halted in many countries due to concerns about a link between the vaccine and blood clots. After further investigation this has now been resumed again but it still seems in some countries there is still some concern around the AZ vaccine. Some countries in Europe have now gone back into lockdown which has been the main reason for weakness in the Euro- and until we begin to see cases fall and vaccinations rise in Europe I think the Euro will remain subdued for the time being.
The UK has also had issues this week with supply of the AZ Vaccine which has meant that vaccinations may be slower through April- however it seems that the UK Governments target will still be met so this has not really been a great cause of concern in the UK- but unfortunately it did cause Sterling exchange rates to drop a little due to the uncertainty. Good news has been priced into Sterling over the last couple of months and any deterring from this will hit GBP quite hard.
Pound Sterling exchange rates are in for an interesting week- we are expecting a few data releases which will begin to add some colour to the UK economy just before the country opens up again in April- the first being UK Employment data on Tuesday. Though many are going to take this data with a pinch of salt due to the furlough scheme still running into September, unfortunately we are still expecting pretty weak figures. On the same day we are expecting a testimony from Fed Chair Powell- and with the current state of the U.S markets, every time he speaks we see movement- so if you are trading GBPUSD- Tuesday will be an important day to watch.
On Wednesday, the UK’s inflation (CPI) figures will be released- and we are expecting the core inflation rate to stay at 1.4% which is below the 2% target but understandable for where we are right now. The BoE seems confident we should get back to 2% over the next year or two so as long as we don’t see a fall from here, Sterling should remain stable. Finally we have UK retail sales figures being released on Friday, which of course are expected to come in weak, but hopefully this will begin to change through April.
Generally speaking, GBP is still relatively strong, and I do expect a move higher against the Euro- however a strong Dollar is holding down the GBPUSD exchange rate below 1.40 for now as we range between 1.38-1.39- as long as we do not go into the 1.37 area then we should go back to 1.40- which is a good area to look at hedging yourself. If you are trading EURUSD- 1.18/1.19 seems to be the area we are ranging in at the moment, and the expectation is this rate moves lower until we see the European economy open up in a few months.