Growth figures rein in the Pound

By Lauren Buckner

GBPEUR rates tailed off at the close of last week as the Pound lost momentum through its break out of the top end of the recent range. Having hit close to 18month highs versus the single currency Friday’s UK GDP figures dampened the gains that had been seen despite coming in at a strong 4.8% growth over the last quarter as consumers returned to hospitality venues and the high street with the easing of lockdown restrictions. Expectations of a strong figure had been built in to the market and missing the Bank of England’s prediction for 5% growth saw investors sell off the Pound.

Having seen interbank levels through 1.18 for the first time in close to 18 months (last seen end of Feb 2020) GBPEUR has moved back to the higher levels of the recent range. Having traded in a tightening range since March this year we now await this weeks UK employment ad inflation figures to give some further momentum to exchange rates.

Having posted just 25,000 new jobs last month the UK employment market is expected to have improved as we have only six weeks left before the successful furlough scheme is unwound. The health of the employment market is likely to take centre stage over the next few months when looking at the health of the UK economy following the Covid pandemic.

Meanwhile the EU continues its marathon effort to vaccinate its population and has now surpassed the US in terms of number of adults to have received both first and second doses and is expected to surpass the UK vaccination rate over the next few weeks as we enter the all important Autumn/Winter season this could be something to watch. Hesitancy (the main block to a further increase in vaccination rates) has been less of an issue in the EU than the UK with many countries imposing some more forceful tactics to ensure that the take up is high, covid passes for hospitality venues, financial incentives – removing free covid tests – and rewards for being vaccinated are all in play.

US data last week caused some significantly volatility particularly versus the Euro as it tested some key levels. Inflation finally cooled after five months of consecutive increases in inflation the headline figure of 5.4% was welcome news for US consumers as the FED’s view of this being a short-term storm appears supported. The slow rate of vaccination take-up and a four-fold increase in Covid cases continues to cause uncertainty in the worlds largest economy.

Lots happening this week, please keep in touch with the friendly team here to help you navigate the currency market.

Main events this week;

Tuesday 17th

GBP – UK claimant count

GBP – ILO Unemployment rate

GBP – UK average earnings

EUR – EU Employment change (YoY)

EUR – EU Gross Domestic Product

EUR – EU Construction output

EUR – EU Employment Change

USD – US Retail Sales

USD – US Industrial Production

Wednesday 18th

NZD – RBNZ Interest rate decision

GBP – UK Consumer price index

GBP – UK Producer price index

GBP – Retail price index

EUR – EU Consumer price index

Thursday 19th

AUD – AU Employment change

USD – US initial jobless claims

Friday 20th

GBP – Gfk consumer confidence

GBP – UK retail sales