Mixed News for Exchange Rates

By Lauren Buckner

Exchange rates continue to be much more volatile at present with more significant intra-day market movement than we have seen in general over Q1 2021. The market appears to be stuck looking for clear direction at present while the after effects of a global pandemic skew the economic data and a slow and problematic return to normality is experienced throughout most countries (Australia and New Zealand are notable exceptions to this rule!)

The UK’s vaccination programme continues at pace with almost 33 million people having received their first dose of the vaccine and now 1 in 5 adults having received both! This has undoubtedly helped GBP remain buoyant and once again over the 1.15 interbank rate versus the Euro and testing the 1.40 mark with the USD. Boris Johnson yesterday announced potential for coronavirus treatments in the home, and a dedicated Task force to research these to help those who receive a positive test result in order to further progress the UKs ‘roadmap’ to recovery. This did little to move the exchange rates but again adds a further positive spin for the UK and potential support to Sterling.

However, the continued rumbles from Brexit and the political unrest in Northern Ireland as a result of failed border cohesion is a constant concern for the UK and could impact the Pounds value if tensions continue to escalate. It is also worth mentioning that UK retail sales data for March is due out on Friday and anticipation is for a bounce of over 3pc following on from previous decline of 3.5pc which is something to monitor for anyone with a GBP transfer to make.

Yesterday’s UK unemployment rate came in at a 4.9pc – an improvement on recent figures for the headline announcement. Unfortunately, over 811,000 jobs have been lost in the UK since March last year, a damning example of the impact that the coronavirus pandemic has had on the employment market in the UK, despite significant government investment and support for the jobs market through the furlough scheme. Currently the furlough scheme is due to end October 31st but with employers’ contributions steadily rising, there are ongoing fears that we could see the unemployment stats begin to spiral if the economic recovery is not as fast paced as many hope.

Tomorrow’s ECB meeting has potential to impact on exchange rates, with some suggestions that the ECB are considering tapering off their current quantitative easing programme. If so this would typically be seen as positive for the Euro as it reduces the flow of currency in to the market which means that value should increase as demand rises (and therefore could be negative for our Euro buyers).

EUR/USD movement seems to suggest that this is the expected outcome testing a very key 1.20 level propelled somewhat by US equities rapidly declining in value. GBP and EUR exchange rates face an interesting tussle in coming days and weeks to see which currency will make the most gains in the current environment.

Please keep in touch with us at A Place in the Sun Currency to keep abreast of currency developments.