Update -

Treasury Market Commentary

A weekly economic update from our Treasury team.

Published

5th February 2021

Category

Macro Commentary

The Bank of England had their first meeting of the year yesterday and kept monetary policy on hold as expected. The committee also gave an update on their review into negative interest rates. Although the policy will be kept in the toolbox, further technical work is needed and this will likely take at least another 6 months.

The UK vaccine rollout continues to progress well, although there are concerns over new mutations of the virus. The focus now is the government review on the 22nd February when they will hopefully announce their plans for reopening the economy.

In Europe, the vaccine program remains far behind that of the UK and the US, which is weighing on the Euro.

The Italian political crisis continues, with Mario Draghi, the highly respected ex-head of the central bank, accepting the mandate to form a new government, which is positive news.

Whilst in the US, Biden continues to push for an ambitious new economic stimulus aid package, but they remain unable to reach a political consensus on the numbers.

On the exchanges, the Euro has come under further selling pressure, the dollar has strengthened considerably as the US starts to vaccinate in good numbers, and sterling remains in demand following the Bank of England meeting. The focus today is on the critical US jobs data due at 1.30pm.

GBP/USD again failed at the 1.3750 level and has drifted lower. Strong buying interest is expected around 1.3500.

GBP/EUR is currently trading above 1.1400, its highest levels since May last year. There is further short-term demand building at 1.1250, whilst on the topside the hugely significant 1.1500 level is now coming in to focus.

GBP/EUR – 1-year chart

Week Ahead

Date

Release

Last

Expected*

10/2/21

UK Industrial Prod. YoY

-4.7%

n/a

10/2/21

UK Manufacturing Prod. YoY

-3.8%

 n/a

10/2/21

UK Construction Output YoY

-1.4%

 n/a

10/2/21

UK GDP YoY

-8.6%

 n/a

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

EUR/USD

1.1975

AUD/USD

0.7610

GBP/USD

1.3685

USD/AED

3.6730

GBP/EUR

1.1430

GBP/AED

5.0250

USD/CHF

0.9035

EUR/AED

4.3980

USD/JPY

105.50

XAU/USD

1800

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

6501

+0.63%

S&P

3871

+3.08%

EUROSTOXX

3640

+2.46%

DFM GENERAL INDEX

2670

+6.67%

 

UK Benchmark Rates

Libor

 

Swap Mid (SONIA) ss((SONIA)

 

3 month

0.04038%

2 year

+0.02%

6 month

0.04963%

3 year

+0.05%

12 month

0.09100%

5 year

+0.15%

View Arbuthnot Latham’s Private and Commercial deposit rates.

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