Pound and Euro Forex Market Strong on Positive Data
- Pound gets closer to a record
- The dollar under pressure from the mood of risk
- Markets continue to rebound
The euro and pound foreign exchange market flourished this week, the former getting off to a good start as Europe continues to vaccinate and reduce restrictions. Meanwhile, the pound is approaching a three-year high as the unemployment rate has fallen there, indicating progress is being made in the battle against COVID-19. A weaker US dollar is also at play as markets continue to rebound from their fall, and the Fed firmly maintains its assessment that inflation will simply be a transitory problem.
Jobs surprise helps boost sterling
The GBP had already been in a strong position for cable traders heading into this week. This position was reinforced by very solid data from the UK. In particular, the focus was on jobs and the number of unemployed which surprised analysts, falling below estimates at just 4.8%. The optimistic Brexit news in solving Northern Ireland’s trade woes also helped the pound.
The fact that the UK continues to take a step back from social restrictions as more of the population receive their COVID-19 vaccinations is also a big factor in the story. Anyone over 35 is now eligible to receive the vaccine, and the first groups of people have started taking vacations in other countries on the UK’s green list.
The weakening dollar gives the green light
In addition to the strength that forex brokers have noted in both the major pound and euro currencies, the US dollar has provided a helping hand. This comes as more positive market sentiment takes over last week’s concerns about inflationary pressures. The Federal Reserve and the US state reserve have all done their part by sticking to their policy and supporting the idea that such inflation would be transitory.
The length of this period is unknown, but it seems to have allayed the fears of traders for the time being. At the same time, the US dollar index, which measures the strength of the dollar against the world’s major forex currencies, fell below 90 points. This is a further indication of the weakness of the dollar and the willingness of traders to venture beyond the safe haven.
Wall Street continues to rebound
After a week of roller coasters, it started off on a much more positive note for the markets. The main indices were down yesterday, although marginally after a good weekend last week. Futures trading also appears to be positive as the favorable winds of a global reopening begin to set in.
A confluence of factors including the Fed’s continued rejection of inflation and keeping rates of return at lower levels has allowed traders to come back with confidence after a sell-off last week. This is especially evident in the tech heavy NASDAQ as it looks for a strong rally at the opening bell today.