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Pound (GBP) Struggles Despite UK Business Activity Soaring to a 7-Month High

Published: 24 Mar at 12 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Australia, New Zealand, USA, China,

Pound (GBP) Sinks Despite Covid-19 Vaccine Optimism Buoying Markets

The Pound (GBP) fell against many of its competitors today despite UK business activity growing at its fastest rate since August.

Today’s flash March PMI shows that UK manufacturing and services output had soared to a 7-month high after February’s contraction.

Chris Williamson, Chief Business Economist at IHS Markit, commented on the data:

‘The UK economy rebounded from two months of decline in March, with business activity growing at its fastest rate since last August as children returned to schools, businesses prepared for the reopening of the economy and the vaccine roll-out boosted confidence.’

In other UK economic news, today also saw the UK inflation figure slow to 0.4% in February, owing largely to discounted goods.

Euro (EUR)

The Euro (EUR) rose today following the publication of the latest flash Eurozone PMI Composite Output Index, which beat forecasts and rose to 52.5 – an 8-month high.

Chris Williamson was more cautious, however, commenting:

‘The outlook has deteriorated, however, amid rising COVID-19 infection rates and new lockdown measures. This two-speed nature of the economy will therefore likely persist for some time to come, as manufacturers benefit from a recovery in global demand but consumer-facing service companies remain constrained by social distancing restrictions.’

Now that the European Union (EU) is facing a third-wave of Covid-19 infections, EUR investors are becoming more cautious about the outlook for the Eurozone, however.

As a result, we could see the Euro’s (EUR) gains against its peers being a short-lived phenomenon as the bloc prepares for the possibility of further lockdowns and restrictions in the weeks or months ahead.

US Dollar (USD)

The US Dollar (USD) has benefited from souring risk sentiment today, with risk-off market mood driving demand for the safe-haven ‘Greenback’.

Rising numbers of Covid-19 in Europe have boosted the USD/EUR exchange rate as the single currency is the USD’s major competitor.

USD investors will be awaiting today’s publication of the latest US Durable Goods Orders figure for February.

Any improvement in the outlook for the US economy – the largest in the world – could however limit the USD’s safe-haven appeal and weaken the US Dollar exchange rate.

Australian Dollar (AUD)

The Australian Dollar (AUD) fell today due to the prevailing risk-off market mood.

Added to this growing tension between many Western nations and China have dampened demand for risky assets like the ‘Aussie’.

Because China is Australia’s largest trading partner, any signs of tensions between China and Western powers tend to weigh on confidence in the Australian economy.

New Zealand Dollar (NZD)

The New Zealand Dollar (NZD) has similarly suffered from prevailing risk-off mood today.

New Zealand’s market sentiment has also been plagued by the Government’s planned intervention in the nation’s housing market.

As of Wednesday, 24th March 2021, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1587, GBP USD exchange rate was 1.3689, GBP AUD exchange rate was 1.8033, GBP NZD exchange rate was 1.9643, and GBP CNY exchange rate was 8.9312.
Dominic Lee About Author: (474 Posts)With over ten years experience as an economist – including four years spent as a chief economist with a major currency broker – Dominic has acquired a wealth of knowledge which he uses to forecast market movements. Dominic now works as an independent business advisor and writes for several financial publications.

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