Currency Note

COVID-19 worries weigh on markets

By Carl Hasty July 19th, 2021

The pound has weakened slightly against the euro and has hit a three-month low against the dollar this morning due to worries over rising COVID-19 cases. This comes on ‘Freedom Day’, with most restrictions lifted in England from today.

Nightclubs can now reopen, there are no limits on how many people can meet indoors or outdoors and mask wearing is no longer a legal requirement. Vaccine Minister, Nadhim Zahawi, is due to make an announcement on vaccinating 12 to 17-year-olds later.

In Europe this week, the European Central Bank will announce its latest decision on monetary policy. In news conference last week, President Lagarde said there will be new guidance on stimulus measures.

The dollar has strengthened this morning, benefitting from its safe-haven status as COVID-19 cases rise globally.

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GBP: Pound weakens on ‘Freedom Day’

The pound has weakened slightly against the euro and the dollar this morning, as the UK lifts most COVID-19 restrictions on ‘Freedom Day’. The government’s chief medical officer, Professor Chris Whitty, warned on Friday that the UK is “not out of the woods” and that the country could find itself in a “scary” position in the coming weeks.

For the rest of this week, the markets will be looking to economic data releases and policy guidance from the Bank of England. Bank of England official, Jonathan Haskel, will speak later today.

Business optimism figures will be released for the UK on Thursday, followed by consumer confidence and retail data on Friday.

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EUR: ECB press conference this week

The euro is weaker against the dollar this morning ahead of the European Central Bank’s latest decision on monetary policy, which will be announced on Thursday.

The European Central Bank is expected to leave monetary policy unchanged this week. Any ‘dovish’ comments from President Christine Lagarde that suggest the ECB will be slow to tighten monetary policy could weaken the euro.

Last week, Lagarde announced that there would be new guidance on monetary stimulus and that new measures could be brought in next year to support the European economy. The markets will expect to hear more about this on Thursday.

To finish the week, a series of PMI figures for the Eurozone will be released on Friday.

USD: Dollar strengthens as COVID-19 cases rise

The dollar is strong this morning, benefitting from its safe-haven status due to worries over a global rise of COVID-19 cases and the threat this could pose to economic recovery.

There has been a rise in cases in Southeast Asia, the US and in Europe, with cases in the US up 70% over the past week and deaths up 26%. Outbreaks have occurred in parts of the country with low vaccination rates.

This week, we will see jobless claims figures for the US on Thursday, followed by PMI data on Friday.

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