Daily Currency Update

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USD weaker on new inflation target

GBP - British Pound

Sterling sits higher against both the EUR and USD. GBPUSD rallied to 1.3260 yesterday as the US federal reserve announced it’s new strategy to increase employment and confirmed its tolerance for higher inflation. Speaking at the Jackson Hole symposium on Thursday, Fed chairman Jerome Powell said that they would target an average inflation rate of 2%, countering years of super-low inflation. GBPUSD movement took on a see-saw effect on the news with the US dollar weakening initially, taking the currency pair to 1.3260, but then strengthening back to 1.3172 as US treasury yields rose to several month highs. Overnight the Asian markets have had the chance to digest the new plan, which has seen GBPUSD advance again touching 1.3280 in the past hours. GBPEUR gains seem to be related to the latest coronavirus headlines in Europe. A second wave now seems very likely with the world health organisation alerting Europe to managing a tricky transition from Summer to Autumn. GBPEUR had made an unsuccessful break for 1.1200 yesterday evening and isn't far off now.

We finish this week with other key announcements. Bank of England governor Bailey speaks via web link at the Jackson Hole symposium just after 2pm today. His speech will be monitored for clues on the economic outlook. The US enters its second day of the symposium, with other medium weight data being released throughout the afternoon. Sterling is likely to try and find its feet prior to entering into the bank holiday weekend and the end of the month.

Key Movers

EURUSD is back on the climb. Despite concerns that a second wave of the coronavirus will hit Europe, the EUR has broken 1.1900 against the USD. Weakness in the USD is more likely the reason for the move after the federal reserve announced its new inflation target. EURUSD failed to break 1.2000 earlier this month, so as we peer back above 1.1900 we aren’t far from the recent highs that were last seen back in early 2018.

Expected Ranges

GBP/USD: 1.3170 - 1.3320 ▲

GBP/EUR: 1.1110 - 1.1190 ▲

GBP/AUD: 1.8050 - 1.8260 ▼

GBP/NZD: 1.9810 - 1.9940 ▼

GBP/CAD: 1.7290 - 1.7380 ▲