IFX Market Report: Friday 29th January 2021

After experiencing a setback on Wednesday, Sterling recovered through Thursday and has reached fresh highs against the Euro. The main driver of the foreign exchange market yesterday was once again the volatility in global equity and commodity markets – confirming the growing importance of global sentiment to the Pound. Another key factor for Sterling, particularly relative to the Euro, is the UK’s vaccination programme which continues to be rolled out with impressive speed. The fact that the vaccination programme implies the UK will have a more sustainable exit from lockdown, may be enough to limit any downside for Sterling imposed by movements in global equities.

Having been knocked down into the 1.36’s again on Wednesday, GBPUSD opened Thursday morning at 1.3645. After a slow start, in the early afternoon cable started to gain some momentum, rising above and beyond 1.37. The pair finally closed at 1.3727; but has depreciated since, trading below 1.3670 at present.

In contrast to cable, GBPEUR went from strength to strength in Thursday’s session, delivering a new 8-month high at 1.1347. The pair started the day at 1.1274 and after an exciting rally, finished the day at 1.1323.

With the Dollar a touch softer on the day, EURUSD also managed to gain some upside yesterday – albeit gains were slim. The pair started the day at 1.2103 and closed 20 pips above, at 1.2123.

As stock markets and commodity prices attempted to recover the substantial losses made, US GDP Growth Rate for Q4 came out as forecasted at 4%. Alongside the GDP release was the latest weekly Jobs Report; Continuing Jobless Claims came out better than expected at 4771K, with the forecast being 5054K. Another positive from the report is that Initial Jobless Claims were also better than forecasted, coming out at 847K as opposed to 875K.

US data releases continue today in the form of Core PCE Price Index, Employment Cost Report, Personal Income, and the all-important Michigan Consumer Sentiment. We also have speeches from Fed members Kaplan and Daley.

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