Currency Note

Pound stronger due to signs of economic recovery

By Carl Hasty April 26th, 2021

The pound is edging higher against both the euro and the dollar this morning, possibly due to a robust outlook for the UK economy. A series of positive data releases at the end of last week and comments from the Bank of England’s Deputy Governor over the weekend have raised hopes for a strong economic recovery.

After months of lockdown, both Italy and France have announced that restrictions will be eased. Italy will partially reopen bars, restaurants and other institutions from today, whilst France will ease domestic travel restrictions in May.

The dollar is still weak this morning ahead if the Federal Reserve’s monetary policy meeting this week. Markets will be looking out for any comments from Chairman Jerome Powell and other officials.

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GBP: A strong recovery for the UK?

After edging lower last week, the pound is stronger this morning, gaining slightly against both the euro and the dollar. Against the greenback, sterling is still stronger than this time last month.

Although strong data releases at the end of last week had little impact on sterling, they could support the pound going forward. News this morning reveals that EY ITEM Club have hiked their forecasts for economic growth in the UK due to the easing of restrictions and positive data.

Over the weekend, the Bank of England’s Deputy Governor, Ben Broadbent, said the UK is set to experience a “very rapid” recovery.

Pubs, cafes and restaurants are opening in Scotland and Wales today for outdoor customers. Meanwhile in India, hospitals are overwhelmed due to a surge in COVID-19 cases.

GBP/USD chart

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EUR: Italy and France to ease restrictions

The euro is still strong against the dollar this morning and slightly weaker against the pound.

Both Italy and France have started easing their lockdown restrictions with bars, restaurants, cinemas and concert halls partially reopening across Italy today. France is also set to ease its domestic travel restrictions next month. This easing has fuelled hopes that both countries will be able to accept tourists this summer.

It’s a busy week of data releases for Europe, with German business climate figures this morning and a series of sentiment figures on Thursday, as well as GDP and inflation data on Friday.

USD: Fed meeting this week

The dollar is weaker against a basket of currencies due to a more positive economic outlook in both the US and Europe. This comes ahead of the Federal Reserve’s monetary policy meeting, which is due to conclude on Wednesday.

Federal Reserve Chair, Jerome Powell, is likely to be asked if the improving economic outlook will prompt the withdrawal of monetary support. However, he has repeatedly said that a more ‘complete’ recovery needs to be seen before changes are made, so it is thought that he will repeat this message.

Durable goods orders will be released for the US today, with GDP and personal spending figures later this week.

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