There is talks that the BoE’s forecasts for the year could rise from 5% growth all the way to a potential 7.5%, in the world of forecasting a 50% correction is unheard off. However, with the speed in which the country has been vaccinated and only two weeks away from the country opening up further there is a real optimism.
The Bank of England are also potentially going to announce a reduction in the amount of quantitative easing each month which demonstrates their confidence further, however there is expected to be no indication of an interest rate hike at any point this year with 2022 floated as the first potential date for that. If you’re looking to make a trade in the near future you may wish to be in touch with your account manager for the latest currency news.
On a very positive note, the scientist who’s modelling lead to the first national lockdown has said he doesn’t believe the UK will need a lockdown again. Prof Neil Ferguson has suggested that it is unlikely the UK will need such a severe cause of action following the vaccine rollout. He did suggest that variants coming to the UK could present a challenge and might see the numbers rise, but through booster jabs he suggested the UK could manage without strict lockdowns.
Sterling did yesterday close above 1.155 against the euro with the rest of a week a potential chance to see the rate climb back above 1.16 and potentially test 1.40 once more with the US dollar. A positive Bank of England statement tomorrow from Governor Andrew Bailey could well be the catalyst for multi week highs.
The EU Coronavirus recovery fund is still expected to take several more months to ratify before any nations start to see a share of the €750bn relief pot. It is almost a year since the Eurozone’s biggest bailout was announced however countries are still not in agreement on how to spend the funds. The EU Commission asked all countries to put forward proposals which had to be around green and digital investments, many countries failed to put forward viable proposals before the 30th April deadline last week.
Several countries have pointed out that the US recovery is now well underway, whilst the UK is potentially expected to outperform the US growth. Arguably the EU could be left further behind over the next few months with little major investment coming from the central government.
The sense of slowness with the EU was identified by Michel Barnier the Chief Brexit negotiator for the EU. Talking to French radio he stated that the inability for the EU countries to act independently for the vaccine rollout has led to the slow vaccination rate for the bloc. The EU currently sits at around 28% of all adults vaccinated with the UK around 67%. Barnier’s comments do not for many come as a surprise however they will no doubt resonate with many Brexiteers who cited sovereignty as a reason to leave the EU.
With the Eurozone now coming out of their third waves of COVID infections there is optimism that they will start to see falls in the infection rate that the UK has seen as they finally sped up their vaccination rollout. Furthermore, the talk of the EU being open for holidays could also help boost the economy, this could mean the euro starts to make some gains as the year goes on.
Rumours of the US raising interest rates towards the end of the last month proving false stemmed some of the process the greenback was making against sterling. However this week the rumour mill could once again be starting up again. Janet Yellen who was the last leader of the US Federal Reserve before Jerome Powell took over in 2018 suggested that a small interest rate hike may have to be considered to prevent the economy from overheating. The US under Joe Biden’s Presidency has seen a stimulus package which will see around $4tn injected into the economy, Yellen who is currently the head of the Treasury in the US was providing a warning into the effects of that much money in a short space of time.
Federal Chairman Jerome Powell is very good at keeping his cards close to his chest and quite often the US FOMC (Federal Open Market Committee) can quickly make a decision that the market maybe weren’t 100% expecting. What this normally does mean is increased volatility and some sharp swings in the market.
Whilst the interest rate decisions will be significant over the coming weeks and months, in the short term we have several pieces of data this week which could have an impact on the US dollar. Unemployment data and Non-Farm Payrolls come out on Friday, with today the ISM Services PMI data due which provides a insight into executives optimisms or levels of concerns for the coming months. There is expected to be a retraction in the Services PMI data as some of the initial post lockdown data was so positive. However, this sentiment data release can act as a indicator for the months to come.
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