IFX Market Report: Monday 1st March 2021

Despite struggling in the latter half of last week and losing a lot of the upside it had gained against its peers, Sterling has started this week well. The currency received a boost after the announcement at the weekend that over 20M people in the UK have received a COVID-19 jab. By reaching this achievement, it suggests the UK will be able to lift lockdown restrictions sooner than other countries. This should lead to a strong economic rebound here in the UK. Rishi Sunak’s Budget is the highlight of this week and will likely give Sterling more direction. On The Andrew Marr Show yesterday, Sunak said that he is focused on “preparing a budget that provides support for people and businesses and families through the remaining stages of this crisis". Sunak went on to warn that high levels of borrowing means that Britain is now “more sensitive to interest rate changes” and debt could “rise indefinitely” if borrowing continued after the recovery.

GBPUSD started Friday on the back-foot trading at 1.3944. The pair stayed in a relatively tight range over the course of the session and closed at 1.3945.

GBPEUR in contrast was able to better its position on Friday, closing the week above the 1.15 handle. The pair opened at 1.1473 and closed at 1.1533.

A weaker Euro also meant losses for EURUSD. The pair started strong opening at 1.2153 and came under significant selling pressure on the day, causing it to depreciate and close the week at 1.2091.

Returning to the Budget, Sunak refused to confirm tabloid reports that he is planning to freeze income tax thresholds or raise corporation tax in a bid to lower debt. If Sunak does indeed freeze thresholds, this would mean more people paying more tax as wages rise. In an interview with Sky News the Chancellor said that he “would like to be able to keep taxes low for people in general” but cautiously followed up that he needs to “be responsible” with people’s money.

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