Outlook for the pound sterling against the euro and the dollar over the weekend
British Pound Exchange Rate Outlook
The pound sterling exchange rate against the dollar (GBP / USD) was under the weight of the USD on Friday, slipping 0.25% as it lost the handle of 1.39 to close the week. Clearly, the BoE meeting did little to support the pound, as their subdued concern over inflation was not enough to inspire the Fed to spike the pound. Sadly, coronavirus cases continue to rise rapidly in the UK, painting a difficult picture for the government. On the one hand, it is difficult to be too aggressive on the opening when the crates are climbing. Such an approach would increase the likelihood that other potentially vaccinating variants could form. On the other side of the coin, deaths remain relatively low and mass vaccination seems to be working. A case study for the world, the future of the pound probably depends on its outcome.
Euro (EUR) exchange rate trends sideways
The Euro / Dollar was volatile on Friday as it briefly climbed to 1.1970 early in the North American session before slipping back into the lower half of the handle. Faced with the lack of real economic data, the USD was guiding this pair. EUR / GBP has risen over the past two sessions, a clear sign that the euro has benefited from Thursday’s BoE decision.
Outlook for the US dollar (USD)
Economic data was in the foreground in the United States on Friday. First, the Fed’s favorite PCE data has disappointed, triggering a rally in stocks as inflation fears continue to subside. Justifying the FOMC’s decision not to act, the fact that inflation does not soar is good news for risky assets and potentially not so good news for the USD. Nonetheless, as Michigan consumer sentiment has also faltered, the dollar is holding up as Powell’s âhawkish shiftâ provided strong buying support for the greenback. Let’s not minimize that the 3.4% reading is the highest since the ’90s, even though the market did as Biden’s infrastructure deal appears to be coming to fruition.
Sebastian Galy of Nordea Asset Management provided the following forecast on what to expect in the US markets going forward,
âWe expect the stock markets to continue to rebound in the coming weeks as they ignore the start of a hawkish turn from the Federal Reserve and see it as a check on inflation. US Treasury yields have remained near lows and the equity market continues to project an incredibly high growth and earnings path over the long term. “
Bitcoin fell 8% to close the week, heading into the often tumultuous weekend session with a sharply bearish tilt. The Japanese yen was able to post a slight gain after its Tokyo CPI was slightly above expectations at 0% on Friday morning, while the Australian dollar rose a modest 0.13%.
The day to come
Looking ahead, the week will bring plenty of economic data to move the needle forward. US consumer confidence is important, as the Eurozone will release inflation data midweek, while Chinese PMIs are also available. Obviously, the jobs report will close the week and cast a big shadow on the debates.