Pound buoyed by economic recovery optimism

  • The pound has performed strongly over the past two weeks owing to increasing confidence in the UK economy. 

    Last week we saw the GBP/EUR exchange rate move and hold above €1.17, touching a high of €1.18 this week before sharply retreating again.

    Meanwhile, the GBP/USD exchange rate fluctuated between a low of $1.36 and a brief high of $1.39, while the EUR/USD exchange rate traded between $1.18 and $1.17.

    Staying on top of the latest currency news can help you time your transfers more effectively, so find out what you should be looking out for over the next couple of weeks…

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    What’s been happening?

    The pound has strengthened over the past couple of weeks because of growing optimism over the UK’s Covid-19 vaccination rollout and the UK economy reopening.

    With the UK government confirming the next stage of easing lockdown measures for non-essential retail to open on 12 April, Sterling investors are more hopeful about the nation’s economic recovery in the months ahead. 

    UK economic data has pointed to a more robust improvement in the nation’s manufacturing and services sectors, while upwardly revised UK fourth quarter GDP to 1.3% from 1% boosted UK recovery optimism.

    Meanwhile, the euro has suffered from several of the Eurozone’s largest economies entering lockdowns for the third time as Covid-19 infections rise throughout Europe.

    Added to this, the EU’s relatively slow vaccination rollout programme has continued dampening confidence in the Eurozone’s economic recovery. 

    The US dollar has been propped up by growing safe-haven demand and rising US Treasury yields, while the outlook for the US economy continues to improve. 

    USD exchange rates received further support from President Biden’s $2 trillion infrastructure spending plan, increasing hopes for a swift economic recovery.

    What do you need to look out for? 

    Looking ahead, we could see the euro continue to struggle this week as Europe’s Covid-19 crisis is showing little signs of abating, with the outlook for the Eurozone’s economy likely to deteriorate.

    Pound traders will be eyeing the latest UK data releases, with the publication of the final services PMI for March set to confirm growth in the sector for the first time since October, and UK GDP for February forecast to show modest 0.4% growth on the month.

    We will likely see the US dollar exchange rate head higher as global risk sentiment is likely to take a few hits from rising coronavirus cases in Europe. Consequently, demand for safe-haven currencies like the ‘Greenback’ could increase. 

     

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