Currency Note

Dollar and GBP strengthen as third wave bites

By Christopher Nye March 30th, 2021

In the business news, the giant container ship blocking the Suez canal was finally freed after a week, allowing a traffic jam of some 400 other ships to start moving.

There is also a large floatation in the UK today, with the food delivery company Deliveroo floating on the stock market, one of the largest for a decade.

The UK will continue to bask in warm weather as it enjoys (a few) new-found freedoms. New research from the LSE found that property prices for detached houses with gardens, close to big cities, have risen fastest in the past year but that there was no “rush to the countryside” as some had reported.

On the currency markets the US dollar and GB pound were the strongest performers, at the euro’s expense, but with further volatility expected as we approach the month-end and Easter break.

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GBP: Sterling hits fresh 13-month high

Sterling hit its highest rate for 13 months, strengthening nearly 2% against last Monday against the euro, powered by more good news on vaccine rollout and the first day of fractionally more relaxed lockdown rules.

There was also growth in early trading against the US dollar but this fell away around lunchtime and ended where it started.

Yesterday, mortgage lending data came in above expectations for February, while approvals were below expectations.

There is no significant data today, but plenty early tomorrow morning including GDP and house prices.

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EUR: Euro sinks again on pandemic fears

The euro had a torrid day yesterday, falling to a 13-month low against GBP and four-month low against the US dollar.

The main reason is the worsening situation in the eurozone as Covid’s “third wave” gathers pace with the more infectious variant first discovered in south-east England.

With no data – positive or otherwise – emerging the single currency was left to sink on news of Europe’s biggest economies failing to deal effectively with either vaccines or lockdowns.

However, that could change today, as over the course of the morning there will be a procession of consumer and business confidence data for March from across the eurozone, while tomorrow it’s the turn of the inflation and employment data.

USD: Dollar supported strongly

The dollar strengthened yesterday to a four-month against the euro while staying broadly flat against the pound. The dollar index – a comparison against six other leading currencies showed the dollar at its strongest since November, supported by worries over a significant hedge fund collapse and the Suez blockage, as well as Europe’s third Covid wave.

Against EUR the dollar has gained a full cent over the course of a week – two cents over the month – mainly based on the relative success of America’s vaccine programme.

However, US health chiefs warned that a third wave to match Europe’s is a distinct possibility.

On the data front we have house prices and consumer confidence today.

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