Update -

Treasury Market Commentary

A weekly economic update from our Treasury team.

Published

26th February 2021

Category

Macro Commentary

Global interest rates continue to rise from their historic lows, particularly longer-term rates, as optimism grows on the vaccine rollouts and the lockdown easing, and the market looks ahead to the economic recovery.

The prime minister has announced the eagerly awaited government roadmap out of lockdown, which has been generally well received. Focus now turns to next week’s budget, with the chancellor under huge pressure to balance massive debt levels against stimulating economic growth.

UK jobs data this week was relatively robust, unemployment has ticked up to 5.1%, whilst earnings are up a higher than expected 4.7%, although the furlough scheme continues to distort the picture.

In the US, the Fed chairman reiterated that interest rates will remain lower for longer, with the dollar weakening on his generally dovish tone.

An initial vote on Biden’s economic stimulus plan is scheduled for today.

On the exchanges, sterling remains the best performing G10 currency against the dollar this year, driven by strong UK asset inflows, although we have seen a strong a sell-off overnight.

GBP/USD had hit fresh 3-year highs towards 1.4200 earlier this week, before dropping back below 1.4000 this morning. There is further sterling demand building at 1.3750.

GBP/EUR, having briefly pushed up to 1.1700, has quickly fallen back below 1.1500 on general profit-taking and month-end flows. There remains strong buying interest at 1.1250.

GBP/USD – 1-year chart

Week Ahead

Date

Release

Last

Expected*

1/3/21

UK Markit Manufacturing PMI SA

54.9

54.9

2/3/21

UK Nationwide House Px NSA YoY

6.4%

5.5%

3/3/21

UK Markit/CIPS Services PMI

49.7

49.7

3/3/21

UK Markit/CIPS Composite PMI

49.8

49.8

4/3/21

UK New Car Registrations YoY

-39.5%

n/a

4/3/21

UK Markit/CIPS Construction PMI

49.2

51.0

4/3/21

EU Unemployment Rate

8.3%

8.3%

5/3/21

US Change in Nonfarm Payrolls

133k

49k

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

EUR/USD

1.2145

AUD/USD

0.7835

GBP/USD

1.3930

USD/AED

3.6730

GBP/EUR

1.1470

GBP/AED

5.1150

USD/CHF

0.9050

EUR/AED

4.4600

USD/JPY

106.05

XAU/USD

1761

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

6655

+3.02%

S&P

3829

+1.95%

EUROSTOXX

3691

+3.92%

DFM GENERAL INDEX

2527

+1.39%

 

UK Benchmark Rates

Libor

 

Swap Mid (SONIA) ss((SONIA)

 

3 month

0.06275%

2 year

+0.10%

6 month

0.08325%

3 year

+0.19%

12 month

0.13925%

5 year

+0.38%

View Arbuthnot Latham’s Private and Commercial deposit rates.

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