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All eyes on the US as Sterling takes a back seat

GBP - British Pound

It has been a very quiet week on the data front for the Sterling. It remains very much on the front foot versus the euro, predominantly driven by confidence in the UK economy and the ongoing successful vaccination programme.

Forecasts from economists have now pushed forward the likelihood of an interest rate rise from the Bank of England into 2022, which has also helped buoy the currency.

Key Movers

Focus has remained on the US dollar all week, with the currency strengthening against all its G10 peers. The Jackson Hole Symposium will take place at the end of August, where all the Federal Reserve members will be meeting.

Market expectation is that the meeting will discuss how the central bank could start tapering its asset purchase programme, which could be positive for the US dollar.

The Federal Reserve is also expected to bring forward when it will start increasing interest rates again, and this has helped keep the US dollar strong.

We have US CPI data out later today, and this will be watched closely for further signs of US inflation. Last month saw the strongest CPI figure in 13 years, which has been part of the reason the market speculates that interest rates in the US could be increased. A weaker posting here could work against the US dollar, as the market may wonder if an interest rate hike from the Fed is justified.

German ZEW was released yesterday, and the posting did nothing to help the euro. The euro has already weakened in the last two weeks, being the main victim of USD strength. However, yesterday's posting of 40.4 was a significant decline from the previous 63.3, suggesting that confidence in the German economy remains weak. There are concerns about the impact of the COVID-19 Delta variant and whether further lockdowns maybe required. This weak reading left EUR/USD at a 4 month low.

Expected Ranges

GBP/EUR: 1.1760 - 1.1815 ▲

GBP/USD: 1.3770 - 1.3845 ▼

EUR/USD: 1.1685 - 1.1730 ▼

GBP/AUD: 1.8715 - 1.9020 ▲