GBP

Sterling remains strong against most G10 currencies, however the currency is currently unable to stop the US Dollar regaining ground lost at the start of the year. Sterling does however remain strongly supported and will look towards Bank of England Governor, Andrew Bailey’s speech today to see if there are any further developments with the central banks plan as the UK begins its move out of lockdown. The topic of negative interest rates has been a major talking point in previous speeches, however recent comments have made it fairly clear the Bank of England do not see negative interest rates being taken in the near future, unless Governor Bailey goes off the expected script we are unlikely to see too much potential downside risks.

USD

The US dollar hit multi-month highs against the euro and other G10 currencies at the end of last week after Federal Reserve Chair Jerome Powell did not express any concern about the recent sell-off in bonds while sticking to his stance to keep interest rates in the US low for a long time.

While Powell did stick with his dovish rhetoric overall, he said the sell-off in Treasuries was not "disorderly" or likely to move long-term rates high enough the Fed might have to intervene more forcefully, reigniting a sell-off in Treasuries.

Powell also once again states his commitment to maintain ultra-easy monetary policy until the economy is very far along the road to recovery.

Currency markets are being heavily influenced by central banks at this time and if Federal Reserve interest rates are going to be on hold for a long time, this would mean long-term inflation is going to be higher in the US and that's a big reason we are seeing the bond and equity markets sell off heavily. Upcoming U.S. fiscal stimulus is also adding fuel to expectations of higher inflation, as the accelerating roll-out of COVID-19 vaccines boosts confidence in an economic recovery, President Biden recently stated his aim to offer every american citizen a vaccine by the end of May.

Key announcements

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