Daily Currency Update

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Sterling on the front foot against the euro

GBP - British Pound

With a quiet week for data, it is a surprise that we are seeing the volatility we are in the financial markets. Both Gold and Oil ended their session almost 2% below where they started the day and were almost 4% lower at one point in Asia's trading session. This volatility reaffirms that currently the markets are primarily driven by three major factors and have been for some time: Monetary tightening, inflation, and the COVID-19 Delta variant.

Sterling remains on the front foot, particularly against the euro, in part due to ongoing confidence in the UK economy and the vaccination programme. This is also due to comments from the Bank of England last Wednesday during their latest rate announcement that ‘some modest tightening of monetary policy is likely to be necessary’ over the next two years to keep inflation under control. This continues to bear positive for the pound, which has once again broken through the 1.18 psychological barrier against the euro.

Key Movers

The US dollar continues to drive higher against most of its currency peers, in part due to above target inflation and expectations rising around the Federal Reserve tapering its asset purchasing programme and that they may eventually have to increase interest rates.

At the end of August, the Fed members will meet for their annual Jackson Hole symposium and its expected that dates of when tapering will begin could be announced during this meeting. Last week's positive jobs data supported this argument, with a stronger than expected non-farms payrolls figure on Friday. Gold prices temporarily crashed for this reason alone, but a fall in the stock markets this morning suggests that there are still some significant concerns around global COVID-19 case numbers.

The US is now witnessing more than 100,000 cases a day, the highest figure they have seen since February. Many offices have now delayed plans for reopening and global restrictions appear to be returning. The sell off in oil, gold prices recovering and a decline in stocks are a reflection of the market's anxiety around the Delta variant.

Expected Ranges

GBP/USD: 1.3810 - 1.3885 ▼

GBP/EUR: 1.1775 - 1.1835 ▲

EUR/USD: 1.1710 - 1.1770 ▼

GBP/AUD: 1.8810 - 1.9035 ▲