Sterling appreciated on the news that 18.5% of the UK population has now received at least one vaccine dose, making ground on the Dollar at any sign of weakness. News that the EU wants an extension until April 30th to ratify the EU/UK trade deal had little impact, but markets were still concerned about trade difficulties under the new regime, especially in Northern Ireland, which will impact UK growth. Bank of England Governor Bailey made no monetary policy comment in his comments yesterday but did mention that financial equivalence talks, excluded from the current deal, with the EU were not going well. Sterling strengthened highs above 1.3850 on the Dollar and 1.1415 against the Euro.
RICS house prices fell to 50 in January, well below expectations of 60 and 63 the previous month, reinforcing the trend of a slowdown in the sector. Sterling opens to trade around 1.3850 on the Dollar and around 1.1422 on the Euro.
US consumer prices increased 0.3% for January which was in line with expectations, although the year-on-year rate was held at 1.4% compared with consensus forecasts of 1.5%. Energy and clothing prices strengthened sharply on the month, but car sales declined. Core prices were unchanged on the month, below expectations of a 0.2% increase and the annual rate slowed to 1.4% from 1.6% and below forecasts of 1.5%. The CPI data helped sooth market concerns over the risk of higher inflation.
Federal Reserve (Fed) Chair Powell reiterated that the current pace of bond buying would continue until substantial further progress had been made towards maximum employment and price stability. He also stated that the US was a long way from full employment and monetary policy would not be tightened solely in response to a strong labour market. Powell repeated that the Fed will aim to achieve moderately above 2.0% for some time.
The Euro maintained its firm tone throughout Wednesday’s trading session, although the US Dollar was able to demonstrate some solidarity as the single currency struggled to extend its gains further.
There were also additional reservations over the EU vaccine programme as EU Commission President Ursula von der Leyen admitting that there had been and still are significant difficulties. According to reports in German, no easing of the current lockdown measure will come into play anytime until at least March 7th, maintaining reservations over the near-term outlook. With ECB President Lagarde also stating that inflation was not converging to the goal over the medium term and that the accommodative monetary policy must continue.
As of writing, the Euro is currently trading around the 1.2120 mark against its US counterpart.
Data to watch
05:00 - EUR - EU Economic Forecasts
08:30 - USD - Unemployment Claims
Posted in Daily Market News on Feb 11 2021