The pound moved sideways against the dollar for much of yesterday, having jumped from near two-month lows on Monday as large swathes of the high street reopened in England. Despite reports showing the UK economy returned to modest growth in February and is heading for a ‘strong bounce back’, it remains well below its pre-pandemic peak amid the latest lockdown.
Figures released by the Office for National Statistics revealed that UK GDP rose 0.4% in February, after shrinking in January, as government restrictions impacting economic activity remained broadly in place – leaving the economy 7.8% below the levels seen 12 months earlier. Growth was fuelled by the production and construction sectors, with output increasing by 1% and 1.6% respectively.
The UK’s dominant services sector expanded modestly due to lockdown restrictions, growing by 0.2% in February, as wholesale and retail trade sales picked up slightly. Overall, however, consumer-facing services industries remain well below pre-pandemic levels.
Last week the pound lost 1% against the dollar as officials advised the use of alternatives to the prevalent Oxford-AstraZeneca vaccine for under-30s. According to analysts, the UK’s vaccination drive has not been knocked off course by curbing the use of AstraZeneca’s vaccine, preventing further losses for the UK currency so far this week. The country has now offered all over-50s a first dose of a vaccine as the Moderna shot was rolled out in England yesterday, the government said, adding it’s on course to administer a jab to all adults by the end of July.
US Inflation Rises More Than Expected in March
The dollar crept higher yesterday morning, helped by a rise in US Treasury yields, while riskier currencies dipped, as markets waited for pivotal inflation data. When it eventually arrived, it showed that consumer prices in the US – as expected – jumped higher in March, boosted both by a strong economic recovery and year-over-year comparisons.
The consumer price index rose 0.6% from February, but 2.6% from the same period last year, narrowly exceeding projections of 0.5% and 2.5% respectively. The year over year gain marked the highest rise since August 2018, well above the 1.7% recorded in February.
A relatively quiet day in the economic calendar on both sides of the Atlantic means a series of speeches from central bank officials will be closely scrutinised by investors: in the UK we will hear from Bank of England Monetary Policy Committee member Jonathan Haskel; while in the US, Federal Reserve chair Jerome Powell, vice-chair Richard H. Clarida and president of the Fed Bank of New York John C. Williams all provide economic updates.
Also scheduled for release from the US is the Fed’s Beige Book – a survey that gives a picture of overall US economic growth – and MBA mortgage applications.
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