Sterling falls on profit-taking
It looks like a classic case of 'profit-taking' has taken place today with the £ down 0.5% against the majors. With no event news released, it seems investors believe the Pounds value has become too high of late and so have cashed in on positions. The setback only puts £-€ & £-$ rates to a 1-week low, so no real damage done thus far.
In fact the headlines continue to support the Pound both near and long term. Today, Deutsche bank raised their growth rates for the UK and believe the economy will be at 98% of its pre-pandemic level by year-end. They have upped their GDP forecast to 5.7% this year, up from 4.5% previously. Noting that the pandemic is far from over in Europe, they have revised down their GDP forecast from 5.6% to 4.6% in the Euro-Zone.
This leads us on nicely to the next two positive headlines, which suggests British optimism is extremely high just now. According to a YouGov poll released yesterday, Brits are much more optimistic about the Covid-19 crisis compared to their European counterparts. 85% believe the UK's coronavirus situation is getting better, compared to 66% from Spain, 43% from Germany & just 32% from France.
Optimism in the Euro-Zone will likely have taken a further hit after a number of European countries temporarily suspended the Oxford/AstraZeneca vaccine, due to some small cases of blood clots. This vaccine was to be the backbone of the EU's vaccine rollout this year. After a 3-month delay on vaccine policy, the EU are already way behind its peers. The timing of the measure is also questionable, as another wave of infections sweep through many EU nations.
Another poll from Ipsos MORI this time shows Britons are optimistic about the UK's economy too. The rapid vaccine rollout and a sustainable, irreversible roadmap out of lockdown, mean consumers and businesses can plan with confidence. An index score of +2 and with 90% believing the Government have done a good job on vaccinations, means Brits are the most optimistic since 2015. Consumer and business confidence are potent drivers for economic growth. If optimism is positive, more money gets spent which is obviously a key ingredient for growth.
We have UK & US rate decisions this week with both press conferences after key for market volatility. Tomorrow, the EU releases inflation data which could be a non-event, so all eyes on whether the Pound can reclaim some lost ground this week.