GBP

Sterling recovered slightly against the euro and dollar yesterday despite last week’s market sentiment shift towards risk-off.

With a pretty quiet economic calendar so far this week, it’s difficult to identify a main reason for the move. It could just be a general shift in risk sentiment or investors may be pricing in a potential hawkish move from the Bank of England later this week.

Of the data that has been released, research showed eleven of fourteen sectors reported faster growth month-on-month. That’s up from nine in April. UK tourism and recreation showed the biggest rise as hotels and pubs benefited from the easing of restrictions.

The Delta variant remains a concern and will likely limit sterling’s ability to rebound if cases turn to hospitalisations. As of yesterday, the UK reported 10,663 new cases and five further deaths on Friday compared to 7,742 infections and three deaths the same time last week.

Prime Minister Boris Johnson has said he cannot categorically rule out any further lockdowns.

USD

The dollar dropped a little on Monday as investors took profits and prepared themselves for a week of Federal Reserve speeches.

This follows the central bank’s hawkish turn last week as they bought forward the median starting point for interest rate rises to 2023, a year earlier than markets had forecast.

The week began with New York Fed President John Williams striking a more dovish tone, claiming more economic progress is needed before the Fed starts tapering bond purchases.

Dallas Fed President Robert Kaplan and his St Louis counterpart Jim Bullard didn’t agree. Their comments were more in line with last week’s hawkish projections.

Key announcements

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