Pound versus Dollar hits key barrier

Hi everyone,

Plenty to get through today, so let's get to it..

Firstly, the Pound touched 1.40 against the US Dollar today, making it the second psychological barrier hit this week (1.15 v €). Mid-market hasn't comfortably broken the position yet, but will flirt 1.40 for the rest of the session. Apart from the poor US jobless claims data yesterday, another contributing factor has been the nationwide cold snap in the US, that is disrupting the vaccine rollout. We knew £-$1.40 was on the cards at some point in H1, but now traders will set their targets for 1.45.

Sterling gained yet more ground on the Euro yesterday, after the ECB announced its profit had dropped €800 million last year. But the drive to hit a fresh 11-month high yesterday wasn't from this news, but more enthusiasm from traders betting on a stronger £. 3% has been gained in 6-weeks against the single currency, half of that has been from this week. 

Onto the key data that was released this morning then and the Euro-Zone published some mixed data. Composite PMI came in as forecast, but the services sector shows a slump in activity (9-month low in Germany) coming in below expectations. But it was the manufacturing figure that has cushioned the € with a much higher reading, mainly thanks to Germany. The Germans posted a strong 3-year high in manufacturing to help support the Euro today.

Over to the UK where it was a mixed morning too, starting with some painful retail sales figures. Analysts expected a poor reading after December's underwhelming number, but it was quite a miss on estimates (-8.2% v -3%). Retail sales volume is 5.5% lower YoY, which is a big hit. But, the Pound bounced back a couple of hours later with some very strong PMI readings. Manufacturing was up (54.9 v 53.1), composite breezed past expectations (49.8 v 42.6) and the all-important services sector smashed forecasts by nearly 8 points. The readings show the economy is steadying in February and aids in the already positive picture of the UK & £ at the moment.

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