Daily Currency Update

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FOMC minutes expected this week

GBP - British Pound

The pound was relatively unaffected by the news on Thursday that UK GDP grew 4.8% in Q2. The figure not only came in line with the consensus but followed three months of COVID-19 induced lockdown in Jan-March.

As Sterling had little to no macroeconomic data to digest on Friday, movement against the EUR and USD was based on headlines and data elsewhere.

GBP/USD dropped below 1.3800 before midday on Friday, before making a break for 1.3900 nearer the end of the day. GBP/EUR movement was within a narrow range, moving within 1.1740 and 1.1760.

COVID-19 concerns remain a big talking point in the UK especially since restrictions were eased over the past couple of months. Despite relatively high case numbers, the mortality and hospitalisations rate is much lower than in the winter. As 75% of the population is double jabbed, and many now have protection after having the virus, it seems further restrictions will be kept at bay for now.

Key Movers

US inflation is likely to be in the headlines over the next couple of weeks with the FOMC meeting minutes expected on Wednesday and the Jackson Hole Economic Symposium next week. Markets are split as to whether we will see any change in language from the Federal Reserve Chairman. Despite the high, possibly temporary rate of inflation, the labour market is still not fully healed, and Friday’s University of Michigan Consumer Sentiment number may not have gone unnoticed. It came in at 70.2, its lowest reading since Dec 2011 and even worse than April last year. Respondents to the survey highlighted the Delta variant being of particular concern for economic outlook.

The US dollar could rally this week if minutes of the Federal Reserve’s last policy meeting confirm that a shift on tapering of Quantitative Easing (QE) is likely.

Expected Ranges

GBP/USD: 1.3790 - 1.3960 ▲

GBP/EUR: 1.1710 - 1.1820 ▲

GBP/AUD: 1.8810 - 1.8950 ▲

GBP/NZD: 1.9640 - 1.9810 ▲

EUR/USD: 1.1730 - 1.1840 ▲