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Sterling under pressure after Bank of England comments

Daily Currency Update

GBP - British Pound

After the pound started the week on the front foot, Bank of England's Michael Saunders poured cold water on the moves yesterday after he suggested that the rise in interest rates from the Bank of England maybe quite a while yet.

This was after suggestions that the UK government may have to introduce a 'circuit breaker' in October to stem the rise in cases of the Delta variant in the UK. All in all, the uncertainty around Coronavirus and the implications to the UK economy are still very real.

Bank of England speakers dominate today's proceedings too, with Governor Andrew Bailey and three other key names speaking today. With this potentially being the last chance the market will get to identify any hints on the Bank of England’s stance before the key 23rd of September meeting, we might see the pound being oversensitive to any policy related comments by the speakers and volatility may present itself.

Key Movers

The US dollar rose for a second day yesterday as it attempted to break away from its new month lows from last Friday, but attention now turns to outside of the US for several key central bank meetings.

We saw the Reserve Bank of Australia leave rates steady and commence on tapering, but they have pushed back the next review. Ongoing concerns over lockdowns have pushed the Australian dollar lower leaving a cautious tone over risk sentiment and providing the US dollar with some support. The US dollar was also supported by rising US treasury yields with US 10 year yields which were at 1.299% before Friday's Non Farm payrolls, now rising to 1.371%. Spiking cases of the delta variant in the US and talks of a reintroduction of restrictions have caused the market to take caution once more and has boosted the dollar’s appeal as a global safe haven currency.

All eyes are now on the European Central Bank's announcement on Thursday, where talks of tapering the asset purchasing programme could see the euro strength we have been seeing continue.

Expected Ranges

  • GBP/USD: 1.3710 - 1.3800 ▼
  • GBP/EUR: 1.1580 - 1.1690 ▼
  • GBP/AUD: 1.8560 - 1.8755 ▲
  • EUR/USD: 1.1865 - 1.1780 ▼