Pound US Dollar Surges as Dovish Fed Prompts Sharp Losses in USD

Pound (GBP) Slips on Vaccine Shortage Warning

The Pound (GBP) ticked lower during yesterday’s session after the NHS warned it is facing a ‘significant reduction in weekly supply’ of coronavirus vaccines from the end of this month, something which could delay reopening of the economy.

Meanwhile, the Bank of England (BoE) is set to conclude its latest policy meeting later today, and is widely expected to have opted to leave interest rates on hold again this month.

Instead, the focus for GBP investors today will be on the BoE’s economic outlook, with the Pound potentially gaining ground if policymakers appear upbeat in light of the UK government’s reopening plans.

Ahead of the BoE announcement, Sterling is making some gains this morning. The GBP/EUR exchange rate is ticking higher just below €1.17, while the Pound US Dollar rate appears to be holding in a narrow range despite rising US bond yields.

Euro (EUR) Muted as German Growth Forecasts Revised Lower

The Euro (EUR) struggled to attract support on Wednesday following the news that Germany’s top economic advisers have lowered their domestic growth forecasts for 2021.

The German Council of Economic Experts cut its GDP forecasts from 3.7% to 3.1% this year citing the ‘renewed rise in infection rates autumn 2020 and the restrictions that currently remain in place.’

Meanwhile, EUR investors will look to a speech by European Central Bank (ECB) President Christine Lagarde for fresh impetus this morning.

US Dollar (USD) Stumbles Following Dovish Fed

The US Dollar (USD) traded with modest gains through yesterday’s European session as US Treasury yields struck a new 13-month high ahead of the Federal Reserve’s policy announcement.

However, the ‘Greenback’ subsequently shed most of these gains after the Fed struck a more dovish tone than expected, with Fed Chair Jerome Powell reiterating that the bank is a long way from its next rate hike.

Coming up, the publication of the latest US initial jobless claims could provide a leg up to the US Dollar later this afternoon if they reveal that new claims continued to fall last week as more of the economy opened up.

USD exchange rates are ticking higher so far this morning as US Treasury yields rise again this morning, although the US Dollar Pound exchange rate appears to be holding in a narrow range.

Canadian Dollar (CAD) Stumbles as Inflation Falls Short of Expectations

The Canadian Dollar (CAD) was on the defensive on Wednesday, retreating in response to Canada’s latest consumer price index.

February’s data revealed that domestic inflation accelerated from 1% to 1.1%, missing expectations it would rise to 1.3%, which alongside a dip in oil prices dented the appeal of the ‘Loonie’.

Australian Dollar (AUD) Jumps as Unemployment Tumbles

The Australian Dollar (AUD) rallied overnight on Wednesday, with the ‘Aussie’ catching bids after Australia’s latest jobs report printed well above expectations, revealing the domestic unemployment rate fell to a post-pandemic low of 5.8% in February.

New Zealand Dollar (NZD) Dented by Surprise Slump in GDP

After soaring in response to the USD sell-off yesterday, the New Zealand Dollar (NZD) was forced to shed some of these gains overnight after New Zealand’s latest GDP figures reported a surprise slump in growth in the last quarter of 2020.

Data Releases

11:00 EUR ECB Lagarde Speech

12:00 GBP BoE Rate Decision

12:30 CAD ADP Employment Change (Feb)

12:30 USD Initial Jobless Claims (13/Mar)