Daily Currency Update

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European Central Bank announced no changes

GBP - British Pound

There was no UK data of note yesterday, so Sterling’s movement took direction from headlines elsewhere. The pound jumped against the USD as US GDP posted a sluggish annualised level of growth of – 2% year on year. The poor figure was attributed to the delta variant of COVID-19.

US consumer spending and durable goods sales also disappointed, which collectively has cast doubt on whether the US Federal Reserve will start to taper quantitative easing this year. GBP/USD was at 1.3735 prior to the release but rose to 1.3815 a few hours after.

The ECB left interest rates unchanged yesterday and no change in policy was announced. GBP/EUR movement remained within its recent ranges but did test a fall below 1.1800 yesterday evening.

Next Thursday, the Bank of England will deliver its interest rate announcement and provide its latest monetary policy report. The rising probability of the Bank of England delivering an early rate hike will likely be the focus of pound movement next week.

Key Movers

The main event yesterday was the latest ECB interest rate decision. It was announced that there would be no change in policy. Christine Lagarde could confirm an amendment to the Pandemic Emergency Program in December, with it scheduled to end in March 2022.

Core inflation in the Eurozone is 1.9%, which provides the central bank with more scope to keep stimulus going. There has been no indication that the ECB will reduce stimulus, but they could rebrand the current program and extend it over next year albeit at a reduced level.

The euro could have lost ground against the USD on the news, but as poor US GDP figures were posted at the same time we saw the opposite. Euro jumped to 1.1687 from 1.1588 versus the US dollar. GBP/EUR dropped from 1.1870 down to 1.1799.

Expected Ranges

GBP/USD: 1.3730 - 1.3820 ▲

GBP/EUR: 1.1790 - 1.1880 ▼

GBP/AUD: 1.8240 - 1.8360 ▲

EUR/USD: 1.1580 - 1.1690 ▲