Update -

Treasury Market Commentary

A weekly economic update from our Treasury team.

Published

12th February 2021

Category

Macro Commentary

The ratio of vaccinations to virus cases continues to improve and remains a positive story against a very challenging economic backdrop, ahead of what will be a very difficult budget on March 3rd.

The focus now is on the government’s plans to reopen the economy, with the prime minister due to make an announcement on February 22nd.

The Bank of England effectively ruling out negative rates for at least six months has underpinned sterling and the UK interest rate markets.

UK GDP data this morning showed a 7.8% decline over the past year, the biggest decline since 1709.

In Europe, Mario Draghi, the highly respected ex-head of the central bank, continues his efforts to form a new Italian government, which has been welcomed by the markets.

Whilst in the US, President Biden continues to push for an ambitious new economic stimulus aid package, but they are yet to reach a political consensus on the numbers. Central bank head Jerome Powell reiterated his calls for urgent fiscal support and said interest rates will remain at record low levels for the foreseeable future.

On the exchanges, the dollar remains under pressure across the board.

GBP/USD hit its highest levels since April 2018, breaking through 1.3800, with the hugely significant 1.4000 level the next major target. Strong buying interest remains at 1.3500.

GBP/EUR is currently consolidating around 1.1400, its highest levels since May last year, ahead of the technically important 1.1500 barrier. Further short-term demand is building at 1.1250.

GBP/USD – 1-year chart

Week Ahead

Date

Release

Last

Expected*

17/2/21

UK CPI YoY

0.6%

 0.5%

17/2/21

UK RPI YoY

1.2%

 n/a

17/2/21

UK House Price Index YoY

7.6%

 n/a

19/2/21

UK Retail Sales YoY

2.9%

n/a

19/2/21

UK Markit/CIPS Services PMI

39.5

40.8

19/2/21

UK Markit/CIPS Composite PMI

41.2

42.0

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

EUR/USD

1.2115

AUD/USD

0.7740

GBP/USD

1.3795

USD/AED

3.6730

GBP/EUR

1.1390

GBP/AED

5.0650

USD/CHF

0.8905

EUR/AED

4.4500

USD/JPY

104.95

XAU/USD

1815

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

6528

+1.06%

S&P

3916

+4.27%

EUROSTOXX

3671

+3.35%

DFM GENERAL INDEX

2633

+5.36%

 

UK Benchmark Rates

Libor

 

Swap Mid (SONIA) ss((SONIA)

 

3 month

0.04963%

2 year

+0.02%

6 month

0.07000%

3 year

+0.06%

12 month

0.12100%

5 year

+0.17%


View Arbuthnot Latham’s Private and Commercial deposit rates.

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Weekly

Treasury Market Commentary

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