Good morning,
We wake up this morning to the news that the UK economy shrank by 1.5% in the first quarter of 2021. This figure is unsurprising considering the UK was still in lockdown with schools partly closed and the high street completely shut. We can now see the full economic effect of the pandemic over a year as the UK economy is now 8.7% smaller than before the Covid outbreak.
Sterling has continued its run higher against the major currency pairs with another day of positive moves. Figures this morning showing the UK economy grew 2.1% in March has supported the pound. GBPEUR hit a high of 1.1651 and a low of 1.1611 as well as sterling outperforming the US dollar by 1.64%% in the last week. As mentioned yesterday, the continued positive headlines around the UK fully opening up on the 17th keeps the pound strong. The UK managed to record zero deaths in the Monday figures which helps justify the move by the government to lift restrictions. It is worth mentioning that this jumped back to 20 for the day after.
For all the US dollar sellers and buyers today, we have much anticipated US inflation figures. The censes is that CPI inflation will be up 3.6% in April. Global markets are suffering a sizeable upsurge of selling with investors agonising over the potential higher inflation rates. With inflation rising this can lead to central banks tightening their pockets to slow down the substantial flow of liquidity. In “normal” times the consensus is to commonly look at increasing interest rates and slow down quotative easing to reduce flow. This in turn can support a currency, however with the US governments Covid stimulus package in play we are unlikely to see this.
Have a great day.
Josh Saunders, Senior Relationship Manager.
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