Pound to Dollar Rate Breaks Through 1.37 Resistance Level

GBPEUR Looking to GDP to Save the Uptrend

On Thursday, the pound was buoyed by the Bank of England’s decision to put negative interest rates on hold following its latest meeting of monetary policymakers – instead, focusing on hopes of a rebound in economic activity this spring. By Friday it had received additional support from positive reports that the UK government aims to vaccinate all under 50s by May and a stalling dollar – enabling the pound to dollar rate to march through the 1.37 barrier, where it remained as the week concluded.

Over the weekend, the chairman of the UK’s vaccines task force, Dr Clive Dix, stated his belief that the UK can meet the optimistic target, saying he is “very optimistic” – adding that the taskforce has met every target set so far. Mr Dix also highlighted that the UK would be “ahead of the game” in terms of anticipating coronavirus variants and is making “libraries of future vaccines”.

US Labour Market Stalls

US employment growth rebounded in January but rose less than expected – nonfarm payrolls increased by 49,000 jobs last month against a forecast of 50,000. Meanwhile, job losses in December were deeper than initially thought and the economy created fewer jobs in the 12 months through March 2020 than previously estimated. Friday’s highly-anticipated report from the Labor Department revealed job losses in two sectors that have been propping up the economy: manufacturing and construction – and further losses in the hospitality, retail and transportation industries. All of which strengthens the case for a substantial fiscal stimulus package from the new Biden administration to support the recovery from the Covid-19 pandemic.

The US president spoke out in support of his plans for a $1.9tn package in the wake of the disappointing nonfarm payroll report. Speaking from the White House, Mr Biden said the “biggest risk” to fiscal policy was not if the government went “too big” but rather “too small”, restricting the economic rebound.

Looking Ahead

Without any notable economic data scheduled for release on either side of the Atlantic today, investors will focus on the progress of the UK’s Covid vaccination programme and President Biden’s fiscal relief package. More than 12 million people in the UK have now received at least one dose of a vaccine. In the US, hopes are high that Democrats can pass the $1.9 trillion bill, despite opposition from Republicans who think it is too large.

Investors must wait until Wednesday for any data of note when the UK NIESR Gross Domestic Product Estimate for the three months to January and the US Consumer Price Index (excluding food and energy) are released.

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