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GBP/USD rebounds to $1.39 amid sharp plunge in US Treasury yields

The US dollar struck lower on Tuesday, retreating as a result of plunging US Treasury yields.

Meanwhile, trade in the pound is mixed so far this morning, with GBP/EUR flat at €1.1681 and GBP/USD dipping to $1.3869. GBP/CAD is rangebound at C$1.7581, while GBP/AUD and GBP/NZD have climbed to AU$1.8054 and NZ$1.9406, respectively.

Looking ahead, the spotlight today will be on the latest US consumer price index. Will a bump in inflation help to revive the US dollar?

What’s been happening?

The US dollar retreated through yesterday’s European trading session, tumbling in response to a sharp drop in US Treasury yields, which plummeted from a one-year high.

Traders also shunned the safe-haven currency in the face of improving market risk appetite, with US stimulus hopes and China’s stock intervention both helping to improve the market mood.

This drop in the US dollar helped to take some of the recent pressure off the euro thanks to the negative correlation in the world’s most traded currency pairing.

However, the single currency was unable to take much advantage of this as EUR sentiment was sapped following the Eurozone’s latest GDP estimate that saw growth revised from –0.6% to –0.7%.

Meanwhile, the pound ticked higher on Tuesday as the currency was underpinned by the ongoing success of the UK’s vaccination programme.

What’s coming up?

Top of the agenda today will undoubtedly be the publication of the latest US consumer price index (CPI).

February’s CPI figures are expected to report that US inflation accelerated sharply from 1.4% to 1.7%, which if correct will feed into expectations that domestic inflation may begin to overheat in 2021.

This could trigger another upswing in US Treasury yields, which in turn is likely to bolster the appeal of the US dollar.

In the absence of any notable GBP data releases, we are likely to see the pound continue to be guided by domestic coronavirus statistics, with Sterling potentially strengthening if they remain broadly positive.

Meanwhile, we may see the euro trade in a narrow range today as EUR investors are likely to be reluctant to make any aggressive bets ahead of the conclusion of the European Central Bank’s (ECB) latest policy meeting on Thursday.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.



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