Daily Currency Update

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Sterling's steady rise continues

GBP - British Pound

It has been a solid week for the pound with it recouping much of the losses seen earlier this month when markets were spooked by supply chain disruption. This was highlighted in headline catching fashion at petrol pumps across the UK.

With that issue now passing, and extra support added by the prospect of the Bank of England looking to raise interest rates this side of Christmas, GBP/USD is back up to around 1.37. GBP/EUR is also up above 1.18, however there are plenty of potential hazards ahead for sterling. Daily COVID-19 cases are pushing higher with yesterday’s 45k the highest since July. Although the UK's vaccination campaign could see us through the winter without any more lockdowns, staff absences due to COVID-19 and the continuing shortage of HGV drivers will likely be headwinds for the economy. The recent huge rise in energy costs is also starting to affect businesses, although consumers are protected by legislation from the worst of this sharp spike in wholesale gas prices.

With inflation on the rise, Wednesday’s CPI print will be the next key data release from the UK. An uptick from last month’s 3.2% is expected and many analysts expect it to break above 4% before too long. It’s a quiet end to the week domestically with US data once again the main event as we head into the weekend.

Key Movers

It was another US data release which was at the forefront of traders’ minds yesterday as the monthly Producer Price Index fell further than expected showing a slowing in the cost of finished goods made by US manufacturers/factories. PPI for September dropped from 0.7% to 0.5% which could be an indicator that costs for consumers could be set to decline as we head into 2022.

The drop supported stock markets around the world which tend to rally on downside surprises. There was also a better than expected unemployment number from America with weekly claims posting 293k its first less than 300k reading.

Today US Retail Sales numbers are due at 1:30pm, with a slowdown from 1.8% to 0.5% predicted. Around two thirds of the US economy is made up of domestic consumption, so the data is usually closely watched. We also have the Empire State Manufacturing Index reading at the same time with a moderation from 34.3 to 24.9 eyed for New York state's factories. Although still well supported, the dollar has lost some of its might this week. EUR/USD is now up to around 1.1615 and the commodity currencies have also enjoyed gains. The Aussie dollar highlights this with AUD/USD pushing up to around 0.7440 when it was below 0.72 at the start of the month.

Expected Ranges

GBP/USD: 1.3660 - 1.38 ▲

GBP/EUR: 1.1740 - 1.1845 ▲

GBP/AUD: 1.8415 - 1.8560 ▼

GBP/NZD: 1.9380 - 1.9520 ▼

GBP/CAD: 1.6890 - 1.7020 ▼