IFX Market Report: Tuesday 11th May 2021

The Pound started the week exceptionally well on Monday, climbing to 1.41 against the USD, and above 1.16 against the Euro. Despite the SNP winning a majority over the weekend, it would appear that the market does not interpret this as a near-term risk, due to the fact that the SNP did not win an outright majority. Although Sturgeon claims a second independence referendum is evidently “the will of the Scottish people”, due to this weekend’s results, any referendum would require approval from Westminster, and the Prime Minister has already ruled out such a possibility.

Some economists are claiming “Sterling's gains could also be a delayed reaction to the Bank of England raising its forecast for British economic growth at its meeting last week”. While the BoE did slow down the pace of its QE programme, the central bank insisted it was not reversing its stimulus.

GBPUSD gained well over 1% on Monday’s session. Opening subtly at 1.4044 Cable went on to go beyond the 1.41 mark and maintained a position of 1.4138 by the close.

GBPEUR also surpassed an important barrier on Monday. The pair started the week at 1.1556 but quickly made moves to the upside and closed the day at 1.1626.

Monday proved to be a quiet session for EURUSD. The pair opened at 1.2152 and closed just 8 pips above at 1.2160.

On the data front, at 10:00 the highly anticipated ZEW Economic Sentiment Index figures for Germany and the Eurozone will be released. The ZEW Index measures the level of optimism that analysts have about the expected economic developments over the next 6 months. The survey covers up to 350 financial and economic analysts. Eurozone has a previous of 66.3, while in Germany the April figure was 70.7.

In the afternoon BoE Governor Andrew Bailey will be speaking – any further ‘positive’ comments could mean more upside for the Pound? From across the pond, Williams, Brainard, Daly, Bostic and Harker of the Fed will also be giving speeches as the evening progresses.

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