The pound dusted itself off and began moving higher against the dollar yesterday following two consecutive days of losses. Fears that the EU might ban vaccine exports – a potentially disastrous outcome for the UK’s inoculation campaign – and lower than expected inflation numbers, had pushed the pound to dollar rate down to 1.36 for the first time in almost seven weeks on Wednesday. A barren day in the UK economic calendar yesterday meant the pair only managed to recover some of its losses – rising back to the 1.37 mid-range by this morning.
British retail sales moved in line with forecasts, rising by 2.1% in February from January, the Office for National Statistics revealed this morning. This was helped in part by a surge in sales of outdoor furniture ahead of the easing of lockdown restrictions, which will allow people to meet in gardens. Retail sales were down 3.7% compared with 12 months earlier before the pandemic ravaged the economy.
US GDP Growth Rises Slightly
The US economy expanded at an annual rate of 4.3% – slightly higher than previously reported – in the fourth quarter, the US Bureau of Economic Analysis reported on Thursday. This reading came in better than the previous estimate and market expectation of 4.1%, mostly because of higher business investment.
The economy appears to be gaining momentum again, having slowed towards the end of 2020 following a record surge in Covid-19 cases. Economists estimate that GDP will increase at a 4.9% clip in the spring and 7% in the summer – potentially profitable conditions for the dollar.
The dollar also received positive figures from the US Department of Labour. New claims for unemployment benefits dropped to 684,000 last week – the lowest number since the Covid crisis began – as the labour market’s recovery gathered pace.
Initial jobless claims filed for regular state programmes decreased by 97,000 in the week ending 29 March. This was considerably lower than forecasts of a drop to 730,000 new claims and the lowest level reported in a year. It also represents the first time since the start of the crisis in the US that claims fell below the pre-pandemic peak of 695,000 new claims.
The Bank of England’s Financial Policy Committee (FPC) releases the minutes from its quarterly meeting today. This will provide in-depth insights into financial conditions and decisions towards financial stability. The FPC’s accompanying statement will include recommendations to protect and enhance the resilience of the UK financial system.
Several notable data releases from the US hit the headlines today: Core Personal Consumption Expenditure Price Index, Personal Income, Personal Spending, and the Michigan Consumer Sentiment Index.
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