The pound remained on the back foot against the dollar yesterday. Deprived of any data releases in the economic calendar, the UK currency lacked the footing required to mount a fresh advance. On Monday, England proceeded to the next stage of the UK government’s roadmap for easing lockdown restrictions imposed at the beginning of January. The “rule of six” means gatherings are now permitted outside, while group sporting activities for adults and children can also resume in the fresh air.
These positive steps – which occurred in line with the government’s proposed timetable – raised optimism about the UK’s economic recovery. However, they were unable to provide the pound with a leg up because they lacked the surprise factor. Looking ahead, the government has said subsequent stages of reopening could be delayed as they implement the programme by “data rather than dates”. There is a minimum of five weeks between each stage of the roadmap, providing four weeks to collect and assess data and a further week to prepare for the next step.
US consumer confidence hits one-year high
Like the pound, the dollar has been experiencing favourable conditions of late. Accelerating US vaccinations and plans for a major stimulus package stoked inflation expectations and Treasury yields – strengthening the dollar so far this week. Unlike the pound, however, the dollar had some upbeat data to add weight to its momentum yesterday, as well as a risk-off mood in markets amid global Covid-19 ‘third wave’ fears.
US consumer confidence surged to a one-year high in March. Public morale was boosted by growing optimism about the economy and labour market. This supports forecasts for accelerating economic growth in the coming months, driven by additional fiscal stimulus and improving public health.
US home prices are rising at their fastest pace in 15 years. This highlights the fierce competition for a limited supply of homes across the country. Several forces have triggered the red-hot housing market, including a drop in mortgage rates below 3% in July for the first time and demand from millennials. The coronavirus pandemic has also impacted this demand, as Americans sought homes with more space to work remotely during the pandemic or felt able to move further away from their offices.
Today sees the publication of Britain’s final Q4 gross domestic product report. If the nation’s economic growth proved more resilient than expected at the end of last year, hopes for a rapid recovery will rise.
A speech by President Biden and the employment change figure for March could lend the buoyant dollar further support today.