Currency Note

Pound maintains strength against euro

By Christopher Nye August 10th, 2021

The pound is still strong against the euro this morning, trading around 18-month highs. This follows the Bank of England’s monetary policy meeting last week when officials said that it is likely interest rates will be hiked in 2022.

The dollar has strengthened against the euro and the pound since the beginning of the week as the markets continue to process the US’ Non-Farm Payrolls report, which was released on Friday.

Boris Johnson has commented on the UN’s sobering report on climate change, saying that the world must “shift to clean energy resources”. This comes less than 3-months ahead of the COP26 climate summit, which the UK will host in Glasgow this year.

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GBP: Sterling strong against euro, weaker against dollar

The pound is still strong against the euro this morning, trading around the same levels, but slightly weaker against the dollar.

Against the euro, sterling is still benefitting from the Bank of England meeting last week, when officials said that a ‘modest tightening’ of policy would be needed and that the Bank is likely to raise interest rates in 2022, two years ahead of current expectations.

Sterling has been boosted in recent weeks by the reopening of the UK economy and falling COVID-19 cases. However, case numbers have started to rise again in recent days.

GBP/USD chart over past year

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EUR: Economic sentiment figures due this morning

The euro is trading near 4-month lows against the dollar and is also still weaker against the pound this morning.

The economic sentiment index for Germany and the Eurozone will be released this morning, showing the level of optimism that analysts have about economic developments over the next 6 months. For Germany, this is expected to come in lower for August than last month, with 57% of analysts expecting economic improvement over the coming months.

Tomorrow morning, we’ll see inflation rate figures for Germany, which are expected to have risen in July.

USD: Dollar strong against pound and euro

The dollar is stronger against the euro and the pound this morning as the markets continue to digest the Non-Farm Payrolls report from Friday.

The report showed that the US economy added 943,000 jobs in July, the most in eleven months and above market expectations of 870,000.

In a speech yesterday, Federal Reserve official, Tom Barkin, said that inflation is likely to remain at the Fed’s 2% target. He also added that there is still scope for the job market to improve before hiking interest rates. Later today, fellow official Charles Evans will speak.

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