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Sterling remains at strong levels against the euro and the dollar this morning, benefitting from the UK’s speedy vaccine rollout. It is hoped that this will aid an economic rebound in the UK and reduce the possibility of negative interest rates.
In the US today, all eyes are on the Federal Reserve, which will announce its latest decision on interest rates later. Whilst the rate is expected to be kept the same, comments from Fed Chairman, Jerome Powell, will be watched closely.
In Europe, ongoing concerns about the pace of the vaccine rollout are weighing on the euro.
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GBP: Vaccine rollout supports sterling
The pound is stronger against the euro and the dollar this morning. The UK’s speedy vaccine rollout is helping sterling to strengthen, despite the continuing lockdown. As of yesterday, 6.8 million first doses of the COVID-19 vaccine have been administered in the UK.
There are hopes that the quick vaccine rollout will be taken into account when the Bank of England make their interest rate decision next week, weighing against the possibility of negative rates. The success of the vaccine rollout is seen as essential to an economic rebound this year.
There are no data releases for the UK today, but car production figures will be released tomorrow and housing data on Thursday.
GBP/USD chart
EUR: Consumer sentiment in Germany takes a hit
The euro is struggling to gain momentum against the dollar and the pound as concerns continue over the pace of Europe’s vaccine rollout.
At the end of last week, AstraZeneca warned the European Commission that there would be a shortfall in the promised 100m vaccine doses this quarter, of up to 60%. This is due to a ‘technical’ problem at the Belgium plant.
The GfK Consumer Climate Indicator in Germany dropped to an eight-month low of -15.6 this morning, far below market consensus of -7.9. Sentiment was impacted by the extension of lockdown measures.
The ECB’s Chief Economist, Philip Lane, will speak later today.
USD: Focus turns to Federal Reserve
The dollar is slightly weaker this morning ahead of the Federal Reserve’s interest rate decision and press conference later today.
The interest rate is expected to be kept on hold and it’s thought that Fed Chairman, Jerome Powell will renew his commitment to ultra-easy monetary policy and retain a cautiously optimistic tone. The Fed remains optimistic that the US economy can grow by 5% this year.
Durable goods orders for the US will be released later today, which are expected to have increased in December by 0.9%.
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