Pound To Dollar Rate Approaches 2024 High

Sterling reigns as the best-performing G10 of 2024

The Pound to Dollar exchange rate is now testing $1.2800, with the 2024 high located at $1.2827, courtesy of the broader retracement in the Dollar. To be sure, the Pound is an outperformer in its own right as economic activity picks up and the Bank of England says it won't rush into a rate cut, but much of the gains in GBP/USD are owed to the bigger Dollar story. GBP wavered during Thursday’s session, as a lack of data kept the focus on analysis of the UK Government’s Spring Budget. Unveiled on Wednesday, the budget contained a series of economic measures designed to improve the UK’s economic growth. However, further dissection of the measures has been less than promising for the UK’s economic outlook. The Office for Budget Responsibility (OBR) found that the 2% cut to national insurance didn’t counterbalance the previously introduced tax rises. They further remarked that the UK’s GDP growth was unlikely to see a significant increase.

No Major Data

No real change in the ECB narrative

The EUR/GBP exchange rate fell after the ECB kept interest rates unchanged but lowered inflation forecasts, suggesting it was well on its way to hitting its 2.0% inflation mandate on the two-year horizon. Lower economic growth forecasts accompanied the inflation forecast downgrade, although the ECB reiterated it was no closer to cutting interest rates. The market view contradicts ECB releases, Lee Hardman, an analyst at MUFG Ltd says "With inflation more likely to fall back to target and economic growth in the Euro-Zone expected to remain well below potential this year at 0.6%, it is becoming harder for the ECB to justify maintaining the current restrictive monetary policy stance".

Data:

Producer Price Index (MoM)(YoY)(Jan): 0.2%, -4.4% respectively

Gross Domestic Product (QoQ)(YoY)

Payrolls to test post-Powell market reaction to data

The US Dollar suffered large losses against its major rivals for the second consecutive day on Thursday before stabilising early today. The US Dollar Index fluctuated below 103.00, losing more than 1% on a weekly basis. The US Bureau of Labour Statistics will publish the February jobs report ahead of the weekend, which will feature Nonfarm Payrolls, Unemployment rate and wage inflation figures. The benchmark 10-year US Treasury bond yield extended its weekly slide on Thursday and declined below 4.1%. In the meantime, Wall Street's main indexes registered strong gains, while the S&P 500 Index reached a new all-time high at the closing bell. This morning, US stock index futures trade flat and the 10-year yield consolidates weekly losses below 4.1%.

Data:

Fed's Williams speech: 12:00pm (GMT)

Average Hourly Earnings (YoY) & (MoM) (Feb) and Nonfarm Payrolls (Feb)