The pound is still at strong levels against both the euro and the dollar this morning due to general market optimism, positive inflation data and the UK’s vaccine rollout. The promise of economic stimulus relief from the Biden administration has created a more upbeat market mood.
This optimism has caused the dollar to weaken, however, due to its status as a safe-haven currency. In Europe, the European Central Bank will hold their latest monetary policy meeting this afternoon and the euro, the economy and quantitative easing are expected to be discussed.
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GBP: Global optimism gives sterling a boost
The pound has continued to strengthen against both the euro and the dollar this morning. Yesterday, positive inflation rate data gave sterling a boost and the rally has continued. Market optimism due to a Biden Presidency and the promise of more stimulus in the US has also strengthened sterling, as well as positivity surrounding the UK’s vaccine rollout.
Speaking yesterday, Bank of England governor, Andrew Bailey, said that he thinks we are going to “see a pronounced recovery in the economy as the vaccination program, as it is doing now, rolls out”.
Later today, the CBI Business Optimism Index and CBI Industrial Trends Orders, which will reveal how the manufacturing industries have performed in January.
EUR: ECB meeting today
The euro is weak against the pound this morning and stronger against the dollar.
The European Central Bank will hold their latest monetary policy meeting this afternoon and whilst monetary policy is expected to be left unchanged, the markets will be looking out for any comments from officials. The euro’s recent strength, economic the impact of lockdowns across Europe and the tapering of their quantitative easing programme are likely to be points of discussion.
Consumer confidence data for the Eurozone will be released this afternoon and is expected to have reduced slightly from the last reading.
USD: Dollar weaker as large stimulus package expected
The dollar is weaker this morning after Biden’s inauguration yesterday due to the promise of increased economic stimulus for the US economy. This has caused investors to opt for riskier assets and away from safe-haven currencies, such as the US dollar.
Biden’s administration has already proposed a $1.9 trillion coronavirus stimulus package – known as the “American Rescue Plan”. However, it must be passed by Congress first.
Weekly jobless claims for the US will be released later today, which are expected to show almost one million new people claiming benefits.