- GBP/USD is back above the 1.3900 level following a choppy period of trade.
- USD and GBP are both performing well versus the rest of their G10 counterparts on Tuesday.
It’s been a choppy session thus far for cable, the pair having swung back from session lows around 1.3870 to above the 1.3900 level again in recent trade, though still some way from Asia Pacific session highs of just above the 1.3950 mark. Buying into the 4pm London fix appeared to save the pair from lows. As things stand right now, with GBP/USD trading just above the 1.3900 mark, the pair is flat on the day.
Driving the day
In terms of performance versus the rest of the G10 on Tuesday, GBP and USD are performing the best. The US dollar was given a boost on Tuesday by the release of a much stronger than forecast NY Empire State Manufacturing Index survey (the headline number jumped to 12.1 in February versus expectations for a much more modest rise to 6.0 from 3.5 in January). The Dollar Index got a noticeable boost from the data, helping launch it back above 90.50.
The strong survey bodes well for the Philadelphia Fed Manufacturing Survey and Markit PMI report set to be released on Thursday and Friday respectively this week. With Covid-19 infection rates in the US dropping sharply and precipitating further reopening, the impact of January stimulus starting to be felt and expectations for further fiscal stimulus ahead, US economic data is set to improve over the coming months.
Meanwhile, rising US bond yields are also giving USD a boost. US bond markets are experiencing a sharp sell-off on Tuesday upon the full return of US participants to the market; the 10-year yield is up over 8bps on the day to above 1.28%, whilst the 30-year yield is up a similar margin and now above 2.08%. Real yields are also rising, with the net effect being a favourable shift in the attractiveness of holding cash in USD versus other currencies.
Turning to GBP, the news flow has been light on Tuesday, but it seems as though the currency continues to be underpinned by the country’s excellent vaccination rollout progress (over 15.5M now vaccinated) as well as the persistent decline in the country’s Covid-19 infection and death rate. Focus is now on when and how aggressively the country will start to reopen its economy, assuming that vaccines work and reopening won’t be followed by a sharp increase in Covid-19 infections.
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