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Last week saw plenty of volatility in the foreign exchange markets as large US investors switching between stock markets and bonds caused instability for the US dollar.
In the UK, concerns that the return of children to school could drive coronavirus infection rates higher were tempered by YouGov data showing a rise in UK consumer confidence in February – up to 105.4 from 103.4.
Business confidence was also seen to be increasing, after BDO’s Services Optimism Index reported a 12-month high of 94.13 in February – up from January’s 86.60.
Pound gains against the dollar
Sterling started last week at a value of approximately US$1.38 after better-than-expected employment data and rising bond yields at the tail end of the previous week.
As the week progressed, softer than expected inflation data from the US saw the pound reach heights US$1.40 on Wednesday and Thursday.
However, President Biden’s announcement that all US adults would be vaccinated by the end of May and his success passing the $1.9tn Covid-19 relief bill through Congress helped edge sterling back towards $1.39 by close on Friday.
Pound stable against the euro
Against the euro, the pound was stuck in the €1.16s all week. Starting at €1.164, it hit highs on Wednesday and Thursday of just under €1.17 before finishing around 1.168 on Friday.
The European Central Bank’s decision to leave interest rates unchanged passed without surprise or any significant effect on the markets.
Gold largely unchanged
Gold prices for the week were largely unchanged, moving from around US$1,690 per ounce up to $1,740 on Thursday, before finishing the week at around $1,710.
Oil prices rise
Prices rose last week, propped up by output cuts from major producers and optimism about global economic and fuel-demand recovery in the second half of the year.
WTI Crude was up from US$64 per barrel to $66.
The week ahead
This week expect to see the battle continue between bond yields and stocks and shares in the US.
The Bank of England (BOE) is due to make an announcement on interest rates on Thursday. The market is not expecting any changes to the rate but will be listening for any comments on possible inflation.
BOE governor Andrew Bailey recently said he is expecting “a pickup in inflation towards 2% in the next few months” which could boost the value of the pound.
Economic data
Highlights this week include:
Today (15 March)
- Chinese industrial production and retail sales
Tuesday
- German ZEW survey of economic sentiment
- US retail sales
Wednesday
- Eurozone inflation figures
Thursday
- Bank of England interest rate decision
Friday
- German PPI figures
