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UK forecasts upgraded, boosting Sterling

17 May 2021

The UK currency was boosted by the economic data that are yet to released, but GDP growth forecasts are expected to be upgraded. On Monday, the UK will be launching phase three of the unlocking of lockdown restrictions. Phase 3 of reopening will still go ahead, amid fears of the Indian Covid-19 variant in the country, British Prime Minister Boris Johnson stated. At the time of writing, the GBP/EUR exchange rate was at 1.1614 whilst the GBP/USD traded at 1.4058.

According to Bloomberg, economists revised up their forecasts for 2021 growth to 6%, taking it to a high not seen since 1973. The pairing of the vaccine rollout and the easing of the lockdown measures have allowed for these forecasts to be upgraded, catching the attention of FX traders. 

Strategist Valentin Marinov says, “In the near term, the FX market focus will remain on the UK data releases – labour market data, CPI and retail sales for the month of April as well as the preliminary PMIs for May.”

On the other hand, the Euro-to-Dollar exchange rate started the week on a positive note as it is slowly reaching towards 2021 highs. “We look for a re-test [of the EUR/USD] 1.2210/43, the 78.6% retracement of the move seen this year and it is possible that this will provoke some profit taking. This is seen as the last defence for 1.2349, the 2021 high.”

The Euro struggled last week against the Dollar, which got stronger after the US inflation increased by almost double the level targeted by the Federal Reserve (Fed) in April.