Currency Note

Pound unaffected by positive data releases

By Christopher Nye April 23rd, 2021

The pound is still weaker against the euro this morning despite a host of positive data releases in the UK. Sterling has strengthened slightly against the dollar.

Nearly all over 50s have been vaccinated in England, and 10 million people are now fully vaccinated in the UK. Retail sales jumped 5.4% in March, with clothing and non-food stores particularly benefitting from the easing of restrictions.

Christine Lagarde, President of the European Central Bank, was relatively restrained in what she told markets in the latest monetary policy meeting. She acknowledged a positive outlook for the eurozone but said this was “clouded by uncertainty”.

In the US, the labour market appears to be making a recovery as initial jobless claims figures were the lowest since before the pandemic.

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GBP: Nearly all over 50s vaccinated in England

The pound is still weaker against the euro this morning. Sterling has strengthened slightly against the dollar and is still trading at higher levels than this time last month.

This is puzzling markets as recent data in the UK has been mostly positive. 95% of over 50s have now been vaccinated in England with 33 million people in the UK having received at least one dose. Additionally, optimism in the UK’s manufacturing sector has reached its highest level since 1973.

This morning, retail sales soared 5.4% in March, far exceeding market expectations of 1.5%. Clothing and non-food stores saw the biggest jump in sales. Later this morning, PMI data for April will be released.

GBP/USD chart

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EUR: Eurozone recovery “clouded by uncertainty”

The euro maintains its strength, largely due to pound weakness, and is still strong against the dollar.

Comments by President of the European Central Bank, Christine Lagarde, in the latest monetary policy meeting were subtle. Lagarde acknowledged that the outlook for the eurozone is beginning to look more positive; nonetheless, she stressed that economic recovery was “clouded by uncertainty” due to a recent rise in cases in some countries, as well as the vaccine rollout.

In the meeting, it was revealed that the bank will speed up its Pandemic Emergency Purchase Program (PEPP) in Q2 to further support the eurozone economies. Interest rates will remain unchanged for now, but Lagarde indicated that they are likely to rise in the coming months.

USD: Jobless claims lowest since start of pandemic

The American job market appears to be recovering as initial jobless claims fell to 547,000 – their lowest level since the start of the pandemic. This gave the dollar an initial boost against the euro.

On Earth Day yesterday, President Biden revealed a new climate change target for the US. In a virtual summit, Biden pledged to reduce the US’s carbon emissions 50-52% below 2005 levels by 2030. He called this decade “decisive” and one that “will avoid the worst consequences of the climate crisis”.

Next week, the dollar’s fate is likely to be affected by the Federal Reserve’s monetary policy meeting.

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