Currency Note

Pound in need of fresh stimulus?

By Christopher Nye September 2nd, 2021

The pound is still weaker against the euro and trading around the same levels against the dollar this morning, in need of some fresh stimulus during a light week for economic data and Bank of England activity.

However, Brexit tensions could be on the rise again following reports that new rules for moving goods from Northern Ireland to the rest of the UK, which were due to be implemented at the end of this year, have been delayed.

Meanwhile, the euro is still stronger against the dollar due to high Eurozone inflation, which has prompted further ‘hawkish’ comments from European Central Bank officials.

In the US, a disappointing private payrolls report has fuelled worries over tomorrow’s all-important Non-Farm Payrolls, which are considered a key indication of how the US economy is performing.

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GBP: Manufacturing growth slows in August

The pound is trading around the same levels this morning as the markets await more economic data releases tomorrow and next week.

The UK’s ‘Merger and Acquisition’ activity is reportedly keeping the pound supported, however, as the UK has made $343.1BN worth of M&As this year, which is the highest since 2000 and signals a confidence in UK assets.

The manufacturing PMI figure for the UK came in at 60.3 in August, similar to July’s final reading of 60.4. This indicates the slowest pace of expansion in the sector since March, although it remained strong overall.

It’s a light day for UK data today, but services PMI figures will be released tomorrow.

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EUR: Euro stronger due to inflation spike and ECB comments

The euro is still stronger against the pound and the dollar this morning following the high Eurozone inflation reading, which came in at 3% earlier this week.

European Central Bank officials have been commenting following the reading. Bundesbank President Jens Weidmann said that “If these temporary factors lead to higher inflation expectations and accelerated wage growth, the inflation rate can rise noticeably in the longer term.”

He also noted that the ECB will need to start preparing for the end of its Pandemic Emergency Purchase Programme.

It’s a light day for data in the Eurozone, however, PMI figures and retail sales data will be released tomorrow.

USD: Private payrolls fall well below expectations

The dollar is still weaker against a basket of currencies this morning ahead of the US’ Non-Farm Payrolls report tomorrow.

ADP private payrolls were released yesterday. This employment data showed that private businesses in the US hired 374,000 workers in August, below market expectations of 613,000. This has prompted concern over tomorrow’s Non-Farm Payroll report.

Jobless claims figures will be released later today, which will give further indication of how the US’ employment landscape is looking.

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