Currency Note

Pound poised for Bailey speech this morning

By Christopher Nye March 8th, 2021

Sterling is at strong levels against the euro and is flat against the dollar today, after weakening against the greenback at the end of last week. This morning, Governor of the Bank of England, Andrew Bailey, is due to speak about the economic outlook for the UK. Any positive or negative rhetoric could have an impact on the pound.

In the US, a version of Biden’s huge $1.9 trillion stimulus bill was passed through the Senate on Saturday. Democrats pushed it through on a party-line vote after Republicans tried and failed to make amendments.

The European Central Bank will hold their latest policy meeting this week. It is expected to focus on the recent rise in bond yields and the Bank’s inflation projections, and the euro could take its cues from any comments made by ECB President Christine Lagarde.

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GBP: Bailey speech at 10am

The pound is still at strong levels against the euro and the dollar this morning. Sterling weakened against the dollar last week after a ‘dovish’ speech from Federal Reserve Chair, Jerome Powell. However, it is still stronger than it was this time last month.

This morning, Governor of the Bank of England, Andrew Bailey, will speak about the improving economic outlook. Sterling could be impacted by this, especially if there are any surprises or a particularly positive tone.

On Thursday, industrial production, balance of trade and GDP figures will be released for the UK. Britain’s GDP is expected to have shrunk by 2.4% in the three months to January, due to the ongoing lockdown.

GBP/USD chart

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EUR: ECB meeting this week

The euro fell to a three-month low against the dollar last week, due to bond market activity strengthening the greenback.  It is still weak against the dollar and the pound this morning.

On Thursday, the European Central Bank will make their latest decision on interest rates. There will be a focus on how it will react to the recent rise in bond yields and inflation. It’s thought that the ECB could increase its forecast for inflation and lower the forecast for GDP.

Figures released this morning show that industrial production in Germany sank 2.5% month-on-month in January, compared to forecasts of a 0.2% gain. It follows a 1.9% surge in December.

Eurozone GDP will also be released this week, as well as German inflation rate.

USD: Biden’s stimulus bill passes through the Senate

The dollar is strong this morning after a version of Biden’s $1.9 trillion stimulus bill was passed through the Senate via party lines on Saturday. This came after a long 25-hour debate. The House is due to vote on this package on Tuesday, in the hope that financial aid can begin to be distributed as early as this month.

It is also still strong on the back of a positive Non-Farm Payrolls report on Friday, which showed that the US economy added 379K jobs in February, compared to market expectations of 182K. This boost was due to easing business restrictions, falling coronavirus infection rates, a fast vaccine rollout and continued support from the government.

This week, US inflation rate figures will be released for February, as well as jobless claims data. Next week, the Federal Reserve will hold their latest policy meeting.

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