- Euro Drops Below Key Level Amid German Figures
- GBP Also Lower on Tax Increase Rumors
- US Markets Flat Following Huge Gains
The forex market in both the UK and Europe remained under pressure today as both battle their own domestic concerns. The Euro has been deflated by disappointing German retail sales and unemployment numbers while the Pound is penned below $1.40 on concerns the upcoming budget may include a raise in taxes. In the US meanwhile, markets on Wall Street are taking a breather on the back of huge gains in the previous session.
Poor Retail Sales Hamper Euro Progress
Any hopes of a positive move in the Euro have been dampened as both retail sales data, and employment numbers from the largest economy in the bloc have failed to impress. Sales in Germany dropped by 4.5% in January month-on-month. This was a big miss given that analysts had forecast a decline of just 0.3%. The result has been a Euro failing to take advantage of US treasury yield pullbacks and a more risk-on approach in American markets.
Those forex trading the Euro were further disappointed by poor unemployment numbers from Germany that also buck a recent positive trend. The unemployment rate rose by 9,000 in February when a steady decline had been expected. This compounded the setbacks for the common currency which dipped below $1.20 at certain times.
Tax Hike Speculation Restrains Sterling
The Pound has performed well in recent weeks with a very effective vaccination campaign ensuring the UK has stayed on the front foot in its fightback against COVID-19. This strong position has also placed it well to take advantage of any US Dollar weakness. Today though it holds below the $1.40 mark as traders await news from the British Chancellor Rishi Sunak in his budget presentation.
Forex brokers have detected a note of caution among Pound traders as rumors swirl that a tax increase may be imminent. This at a time when business has been largely stricken by the pandemic could strike the first blow against a stellar GBP since Brexit was finally concluded. With the British national debt at levels not seen in several decades though, the overwhelming feeling from Downing Street may be that something needs to be done to claw back the balance. In the meantime, trading in Sterling markets remains pensive.
Wall Street Calm Following Rebound Rally
Following a spectacular day where the Dow Jones turned around a tough start to the week and gained more than 600-points, major markets on Wall Street opened quietly today. With the 10-Year Treasury Yield largely in focus for traders as an indicator of the economy overheating, it seems yesterday’s big gains were driven in a pullback of this number to just above 1.4%.
With earnings continuing to flow in this week, attention has widely turned to the NFP figures due on Friday. A big drop in jobless claims here could well trigger another round of uncertainty to end the week.