21/01/2021

Strong Inflation data fuels sterling rally


GBP

The pound performed well across the board yesterday after the release of better than expected inflation data for December. Cable broke two year highs before retreating and GBP/EUR similarly broke eight month highs. Biden taking office, and the inevitable stimulus package caused sterling to strengthen as investors looked for greater returns. This paired with the UK’s leading vaccination roll-out leads to an optimistic view on sterling in the coming months. Brexit worries have, for now, been pushed to the back of investors mind as the post-Brexit picture looks somewhat clearer.

As of yesterday, the UK has administered 5,070,365 doses of Covid vaccine, 346,922 new doses being administered in the 24hr period leading to Wednesday afternoon. Of the 5,070,365 doses, 4,609,740 people have received their first dose, with 460,625 of those having a second dose (fully vaccinated). The UK would need to continue to administer 350k doses a day to hit their mid-February target. This being said, UK Covid deaths are at a record high of 1820 being recorded yesterday.

Looking ahead, all eyes will be on the Bank of England as they weigh up interest rate decisions at their 4th February meeting.

USD

Yesterday saw the inauguration of America’s 46th president as Joe Biden took the oval office. Shortly after taking office, Biden began signing a number of executive orders, most of which undoing policies put in place by his predecessor Trump. In total, he signed 15 orders, ranging from rejoining the Paris climate agreement, a mask mandate for federal employees on federal property, to finally stopping all funding for the construction of the border wall. Lastly with the Covid death toll passing 406,000, Biden put together a new team to coordinate the US Covid response.

We expect his next step will be to get the highly anticipated 1.9TRN stimulus package passed through congress. Whether the number will be 1.9TRN remains to be seen but we know a large aid package is coming for those Americans who have desperately needed the government’s help. In what seems to be a positive step in the right direction for America, Biden and Harris look to undo all of the divide and trouble caused by the Trump administration.

Key announcements

12:45 – EUR – ECB Interest Rate Decision
12:45 – EUR – ECB Deposit Rate Decision
13:30 – EUR – ECB Monetary Policy Statement and Press conference


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