Daily Currency Update

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Brexit and US trade talks take the main stage.

GBP - British Pound

The pound found itself slipping yesterday after news of a technical recession hit the media. The break of the news itself didn’t weaken the British currency too greatly, however it continued to slip across the day against its major peers. With the Gov’s ‘Eat Out’ scheme, it is likely we shall see a far more attractive reading in Q3, unless of course the nation is forced back into lockdown. On the flip side, it is likely the UK will face mass unemployment in October, once the furlough scheme ceases to create artificial figures.
In COVID-19 related news, the UK have decided to change the way in which the death toll is recorded. The calculation brings England in line with the rest of the UK and majority of the world. This has reduced the death toll figure by 5000 to 41,000 overall. The new rule states that if you die 28 days after contracting the disease, it will no longer be officially considered the cause of death.

Key Movers

US monthly CPI numbers far exceeding expectations yesterday with both the overall and core figures coming in at 0.6% growth. This core reading being the largest since 1991. Better than expected inflation figures generally are a currency driver, however this was not the case yesterday. The US Dollar initially jumped 10 pips against sterling, before weakening once again. The market is once again brushing aside fundamental data and looking for the larger political events to dictate currency direction. With US-China trade talks scheduled to restart in the coming days, it is likely this will remain traders’ focal point for its entirety. The US Dollar gains will likely be limited until the Fed announce an increase in stimulus to support the unemployed in America. Markets are expecting a further 1.5tn to be announced to the package in September.
More positive signs from the Eurozone as Industrial Production showed a strong rebound for the 2nd month in a row however wasn’t quite as good as expected, posting a 9.1% gain. The Euro shows no signs of wavering currently as it continues to outperform GBP and USD. Finally, Australian employment came in at 7.5%, better than expected.
Eyes turn to monthly US Core Retail Sales released tomorrow.

Expected Ranges

GBP/USD: 1.2975-1.3200 ▼

GBP/EUR: 1.0965-1.1140 ▼

GBP/CAD: 1.7240-1.7420 ▲

GBP/AUD: 1.8180-1.8340 ▼