The Pound rebounded confidently over the past week, while the USD and AUD lulled.
Week starting 26-04-2021
- Over the past week we have seen the USD progressively weaken from a moderately strong position. Against the sterling, it had a volatile week with movements from 1.38 to 1.4 and opened this week in the middle at 1.39. On the EUR front it has been a steady slope of decline for the Dollar, we have seen movements from 1.194 to 1.121 where it opened today.
- There was little data impact over the past week and USD weakness was mostly due to the Fed’s decision to keep interest rates lower for longer.
- The major event this coming week is the Fed’s interest rate decision on Wednesday. Nothing is expected to change here, but the tone of the press conference could move the markets.
- EUR market composite Purchasing Managers’ Index (PMI) was released on Friday and came in at 53.7, compared to 53.2 the previous month. This points to expanding economic activity. This expansion is expected to continue as European markets open further and the vaccination rate increases.
- There appears to be no immediate end to the economic stimulus programme. This was reiterated by the European Central Bank (ECB) president during her press conference on Thursday. We can therefore expect the EUR to remain strong against major currencies such as the USD and GBP for now.
- The EUR continued to gain against the USD and GBP last week. This is evidenced by the fact that it opened at roughly EUR/GBP 0.864 and closed at 0.871 for the week.
- The UK continues to lead the race with its vaccination campaign, with over 10 million people having now received two doses of the jab. Coupled with a slumping US dollar, the GBP/USD pair traded with a topside tilt, rising up and touching 1.40 before closing the week around the 1.3875 level. The pair appreciated by 0.32% during the week and kicked off the week today on the front foot.
- UK Business Optimism Indicator hit a 48-year high as manufacturing optimism in the UK jumped to 38 in the second quarter of 2021. Retail sales also surged, rising by 5.4% month-on-month in March. These figures exceeded the market consensus for a 1.5% increase, following an upwardly revised 2.2% rise in February.
- The unemployment rate fell to 4.9%, from 5% last month, exceeding expectations of a slight increase in unemployment. Nevertheless, the number of people claiming unemployment benefits in the UK increased by 10,100 in March, following an 86,600 surge in February. The claimant count rate came in at 7.3%, the same as in February.
- With the UK economy showing promising signs of recovery, inflation is becoming of greater concern. The inflation rate rose from 0.4% to 0.7% in March, a significant uptick for the region. Although this is coming from a very low base, the rise could be an early sign of soon-to-come inflationary pressure. Consumer Price Index (CPI) rose by 0.30% month-on-month.
- The Rand has made record gains in the month of April by climbing 4.2% against the Dollar and 3% against the Pound. It is currently trading at 14.23 and 19.82, respectively.
- Thin liquidity is expected this week with the public holiday on Tuesday. Traders are expected to sit tight as there are very little news events in the coming week to rally the currency in any direction.
- The Aussie Dollar was quite stagnant last week, weakening about 0.1% against the Pound and strengthening about 0.2% against the greenback. Retail sales figures for March were released on Wednesday, increasing by 1.4%. This rise was higher than expected and helped the Aussie Dollar maintain its gains from the previous week.
- The inflation rate pertaining to the first quarter of 2021 is set to be released on Wednesday and is expected to increase by 1%.
- New Zealand continues to show signs of improving growth. Services PMI rose to 52.4 in March, from 49.7 in February, marking the highest reading in eight months. A steep increase in new orders and in business activity has helped to support the local economy. Credit card spending also rose by 2.2%, exceeding an expected year-on-year decline of 10%.
- The annual inflation rate in New Zealand increased to 1.5% in the first quarter of 2021. The Consumer Price Index increased 0.8% quarter-on-quarter in the first three months of 2021, following a 0.5% rise in the previous quarter. Transport prices surged 3.9%. Housing and household utilities went up 0.9%.
- Strong local data, coupled with a mediocre week for developed-market currencies, saw the Kiwi Dollar gain some ground during the week’s trade. The GBP/NZD pair depreciated by 0.34% during the week, closing at 1.9290 from an open of 1.9360. USD/NZD shed 0.66% during the week, trending downwards from an open of 1.40 and closed the week around the 1.3905 mark.
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