Currency Note

Pound gains against dollar as risk sentiment improves

By Bethany Hemsley August 23rd, 2021

The pound is still struggling against the euro but has strengthened a little against the dollar this morning, up from near monthly lows.

It’s quite a busy week for data releases, with PMI for both the UK and US being the focus for markets.

Markets will also be looking for further hints surrounding when the Federal Reserve might start to reduce its bond buying purchases after rumours of a delay were sparked over the weekend.

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GBP: Markets await PMI figures

The pound is still struggling against the euro but has strengthened a little against the dollar this morning, up from near monthly lows.

Last week, a new Covid-antibody treatment was approved in the UK. Although this is good news for the pound, which continues to be weighed down by fears over the spread of the Delta variant, this treatment is very expensive and is likely to only be used for the most vulnerable.

In terms of data, this week we will see Markit PMI, CBI industrial trends orders and car production figures. PMI figures will be the focus.

GBP/USD chart over past year

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EUR: Euro strengthens against dollar

After falling towards monthly lows against the dollar at the end of last week, the euro has strengthened against the dollar this morning.

Last week’s weakness was largely down to dollar strength that came from US Fed comments around tapering. However, as we start the new week, markets appear to have adopted a more ‘risk-friendly’ mood, something that favours the euro. This could be due to speculation that the Fed may actually delay its tapering as the Delta variant continues to spread across the US.

It’s a busy week for data in the eurozone. Look out for Markit PMI, consumer confidence and a European Central Bank meeting.

Any mention of changes to the ECB’s quantitative easing programme could give the euro fresh direction.

USD: Delta variant threatens Fed tapering

The dollar has lost some of its strength this morning as market mood shifts towards a more ‘risk-friendly’ stance.

Last week’s strength came from the Federal Reserve indicating that it would be appropriate to start reducing US bond buying purchases this year, however, over the weekend rumours have been spreading that the Fed may have to delay the tapering of its bond-buying scheme due to the spread of the Delta variant across America and its effects on production output.

The Fed announced that its much-awaited Jackson Hole Symposium will be held virtually, something that also indicates caution.

This week, this US will see data including Markit PMI, durable goods orders, initial jobless claims and a speech by Federal Reserve Chair, Jerome Powell, on Friday.

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