Daily Currency Update

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Markets await ECB interest rate decision

GBP - British Pound

The pound outperformed most of its peers yesterday with GBP/USD rallying after several days of being sold off by investors. It reached 5-month lows earlier this week.

The pound’s drop has been accompanied by stock markets around the world falling on the back of concerns about the resurgence of COVID-19 and rising US inflation. It appears calm has been restored to the markets for the time being with stocks recouping some of their losses and commodity linked currencies like the Australian and New Zealand dollars also recovering.

Those holding the pound may have taken heart from the fact that daily COVID-19 cases haven't broken above 50k for four days in a row after peaking at 54,205 on July 17th. All scientific commentary however indicates that cases will likely head higher so we shouldn’t read too much into this brief plateauing in numbers, unless it continues for several more days. Today we have Bank of England Deputy Governor, Ben Broadbent, giving an online speech later this morning and the Confederation of British Industry's Industrial Orders Expectations due just before lunch.

GBP/USD is up above 1.3750 which is around a cent and a half gain in 24 hours. GBP/EUR has also undone much of the lost ground seen over the past week with it currently trading at around 1.1650.

Key Movers

Today’s main event is the latest interest rate decision from the European Central Bank with no change in rates all but guaranteed. The main area of focus will be whether there is any change to the bank’s Pandemic Emergency Purchase Programme (PEPP) which has seen it buying bonds in an effort to stimulate the bloc’s COVID-19 impacted economy. ECB chief Christine Lagarde will hold a press conference at 1:30pm which will be the main area of focus for investors should no change in the pace of bond buying be announced alongside the rate decision. Commentary by Lagarde around the delta variant of COVID-19 will be closely monitored along with any hints about a possible extension or expansion of the PEPP which is currently scheduled to run until March 2022. It will be interesting to hear Lagarde's thoughts on the economic outlook given the rapid uptick in cases which is being countered by a much improved vaccination programme. From America we have unemployment claims numbers at the same time as the ECB press conference with 350k expected to have applied for unemployment insurance last week. EUR/USD trades at 1.1780.

Expected Ranges

GBP/USD: 1.3640 - 1.3800 ▲

GBP/EUR: 1.1595 - 1.1730 ▲

GBP/AUD: 1.8540 - 1.8710 ▲

GBP/NZD: 1.9630 - 1.9800 ▲

GBP/CAD: 1.7170 - 1.7315 ▲