GBP

Currency markets look hesitant to push GBP further than its recent highs against both Euro and Dollar. Sterling still looks an attractive buy with continued hopes on the success of the UK vaccination program. The Euro is also benefiting heavily from this period of US Dollar weakness.

Some potential worry for Sterling are the UK-EU trade tensions currently being circulated in the media, any news of these tensions building further could see a drop back from current levels, although at the moment the market does not seem too concerned. Bank of England Governor Andrew Bailey did make a few comments regarding the situation, accusing the EU of double standards around equivalent regulatory status.

After a week of little significant economic data, we did have some important figures for the UK released this morning – Q4 GDP growth report along with trade balance and production data. The GDP growth report showed Q4 growth at 1%, beating the 0.5% expected. A worrying figure however is the one that showed year on year the UK economy contracted 9.9%, the largest annual drop ever recorded. The Q4 figure does however show UK economy is dealing with the pandemic better than expected, something that has the potential to give a late week boost for Sterling.

USD

The Dollar continues to have a flat period, sticking around its recent lows and not showing any urgent sign of pushing itself out of its slump. Fed chairman Jerome Powell has continued to stress the importance of a patient monetary policy stance, adding to a few concerns over new President Biden’s plan to quickly inject $1.9 trillion by way of a stimulus package. Three separate fed members have now expressed worries of overheating the US economy too quickly.

Economic calendar

07:00 UK Q4 GDP
07:00 UK manufacturing production
15:00 US Michigan consumer sentiment index