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Sterling dips as risk appetite fades

GBP - British Pound

The pound had an uneventful Monday in the FX markets with little top tier economic data of note. The UK showed another 28k COVID-19 cases, which is in line with the seven day average, and 77% of adults are double jabbed with 89.5% having had one dose.

However, it was news elsewhere that dragged Sterling lower as risk appetite faded with growing Delta variant concerns, the overthrow of the Afghan government by the Taliban, and early Chinese economic data missing expectation.

GBP/USD topped out at 1.3876 around midday, before falling to around 1.3790 earlier this morning. GBP/EUR saw a similar pattern, peaking at 1.1784 and making a break for 1.1700.

Just a few hours ago unemployment and wage growth figures from the UK were released which showed an unexpected fall in the level of unemployment from 4.8% to 4.7%. Wage growth (inc. bonuses) also beat estimations coming in at 8.8% v 8.6% forecast.

This has done little to shake the risk-off sentiment and Sterling has continued its dip against the USD and EUR. Key data later in the day comes from the US, as we anticipate retail sales and Federal Chair, Powell, speaking at an online town hall event.

Key Movers

The Eurozone is due to announce its second estimate of Q2 GDP later this morning which is expected to remain at 2%. The euro has remained range bound against both the USD and GBP in the recent past, but it’s believed that the vaccination program introduced by the UK and the US could help them accelerate out of lockdowns quicker than the Eurozone. In contrast, the UK Q2 GDP printed 4.8% last week. This could see the recent ranges broken for both currency pairs if the recovery from COVID-19 continues to advance quicker than in Europe.

Expected Ranges

GBP/USD: 1.3750 - 1.3860 ▼

GBP/EUR: 1.1690 - 1.1760 ▼

EUR/USD: 1.1760 - 1.1840 ▲

GBP/AUD: 1.8820 - 1.8990 ▲

GBP/NZD: 1.9710 - 1.9990 ▲