By Ashley Finill
Sterling crashes as the Dollar strengthens
Yesterday’s trading saw Sterling slump further against the major currencies as the UK’s crippling economic problems start to dictate the Pound’s movements in the currency market. Sterling’s woes started yesterday morning as the UK posted worse than expected unemployed data. The UK now has over 3 million people unemployed, this is 1% up from last month’s release. This saw the Pound lose over 1% against both the US Dollar and the Euro come the close of play yesterday evening with no sign of recovery overnight as the lows of yesterday are still present this morning. There is a cause of concern currently with the frail Pound, as these levels on GBP-USD were last seen when the pandemic first started. The Conservative Party are coming under mounting pressure as of late, with scrutiny of the handling of the coronavirus, not following of their own rules, backlash from Brexit promises and U-turns on terms and deals and of course the current economic crisis, however one of the things Boris has banged the drum on repeatedly in the House of Commons and in interviews is keeping the British people in work and creating more jobs. yesterday’s unemployment figures may now be a reality check for the Prime Minister. With inflation increasing, the cost of living increasing and the unemployment rate increasing all at alarming rates, this is putting Sterling in a very fragile and vulnerable state, with talks of a recession on the horizon it is tough to see where the Pound’s good fortunes and recovery will come from, certainly in the short term.
Interest rates decisions from across the pond and at home
Today and tomorrow, we have interest rate decisions coming out from the US and UK, respectively which is highly likely to cause volatility in the currency market over the course of this week. Today at 6pm the US Federal Reserve will announce if they’re going to be once again increasing their interest rate to help with the rising inflation rate in the country. Although a rate increase had not been expected there are now several reports suggesting that there may have been a change of plan with an increase now being a possibility. This could see the US Dollar make further gains on Sterling and the Euro. Tomorrow the Bank of England will also hold a meeting on their plans for the interest rate in the UK. A reliable source for data at FX Street is predicting that there could be an increase from 1% to 1.25% as the UK also try to untighten the noose of inflation as it continues to grip the country making the cost of living sky rocket over the past 12 months. If there is no increase and no talk of an interest rate rise in the foreseeable, could we see further losses for the pound? The Governor Andrew Bailey will hold a press conference following the decision at 12pm tomorrow morning.
Data Releases still this week
There are still several important data releases left today and Thursday, however no important release are expected on Friday. Starting with today at 9am Industrial Production is to be posted by the EU which is expected to come in at a more positive figure than last month’s reading from -1.8% to 0.5%. The ECB’s president Christine Lagarde speaks at 4.20pm, this could be a market mover should she say anything regarding their interest rate plans in the coming months. Over to the US at 12.30pm as retail sales figures are to be released. Later at 6pm as mentioned above the Fed will announce their interest rate decision. Over to Thursday and in the early hours Australia will post Consumer Inflation Expectations and their unemployment rate at 1am. At 7.30am Switzerland the Swiss national Bank will announce if they are to increase interest rates in the country. Over to the UK at 11am as the bank of England announce their interest rate meeting. Over to the US as they release building permits, housing starts and initial jobless claims at 12.30pm on Thursday afternoon.