Currency Note

Pound strengthens against dollar

By Erin Harding March 9th, 2020

pound

Coronavirus dominated the headlines last week, pushing both the pound and the dollar down against the euro. The pound did, however, finish the week up against the dollar, despite positive data releases from the US.

This morning, the euro has also been helped against the pound by industrial production re-entering positive figures.

This week, the markets will be looking forward to the UK budget, after much speculation over the tug between Number 10 and 11 over loosening – or not loosening – the purse strings. Tomorrow, we will see eurozone GDP growth figure and then, on Wednesday, a raft of releases from the UK, including balance of trade, construction output and GDP.

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GBP: Pound finishes week strong against dollar

The pound finished the week strong against the dollar and weaker against the euro, due to the strength of the single currency. Sterling was still benefitting from the Bank of England’s cautious approach to rate cuts and a “constructive” start to UK-EU trade talks.

This week will see the UK budget on Wednesday, with headline measures expected to include a tax cut by raising National Insurance thresholds. We’ll also see a series of data for the UK, including Balance of Trade, GDP and industrial production figures tomorrow. Anything that comes in worse than expected could fuel the possibility of an interest rate cut at the end of the month.

The Bank of England will hold their Financial Policy Committee meeting on Friday morning, the minutes of which also may offer an insight into the state of the economy in the face of coronavirus.

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EUR: Euro up against pound as coronavirus fears hit UK markets

Fears over coronavirus have pushed the pound and dollar down against the euro, with the single currency ending last week strong against both currencies. The eurozone was hit earlier by fears over the virus than the UK, which is potentially helping it to keep a position of relative strength now.

Also helping the euro, German factory orders came in unexpectedly high, reversing the last two months’ negative growth. However, the past year has seen a swing from positive to negative and back to positive, so the markets will not necessarily be banking on this continuing.

USD: Dollar weak despite positive non-farm payrolls

The dollar weakened against a basket of currencies on Friday due to a sharp drop in US government bond yields due to coronavirus worries.

Non-farm payrolls beat expectations by a mile, coming in at 273,000, the same as the previous reading and above predictions of 175,000. In February, the biggest job gains occurred in health care and social assistance, food services, government, construction, professional and technical services, and financial activities.

Figures also showed that the US trade deficit narrowed to $45.3 billion in January, compared to expectations of $46.1 billion.

This week, we’ll see core inflation rate and consumer sentiment figures.

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