Sterling is still at strong levels against the euro and the dollar this morning after benefitting from news last week that COVID-19 cases are falling in the UK.
This week, the markets are looking ahead to the Bank of England’s monetary policy meeting on Thursday. Any comments that take a cautious or ‘dovish’ tone could weaken the pound, whilst any suggestion that monetary policy could be tightened ahead of schedule may give sterling a boost.
The euro is stronger against the dollar this morning due to positive data releases at the end of last week and this morning. PMI figures and retail sales will be released today and Wednesday.
At the end of the week, all eyes will be on US Non-Farm Payrolls, a key employment report that could influence the actions of the Federal Reserve and impact the dollar.
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GBP: Markets await BoE meeting
The pound is still in a strong position against the euro and dollar this morning, after strengthening throughout the course of last week due to falling COVID-19 cases in the UK.
This week, the markets will be taking queues from the Bank of England’s latest monetary policy meeting, which will take place on Thursday. Whilst interest rates are expected to be kept the same, any ‘hawkish’ comments from officials that suggest monetary policy could be tightened earlier than expected could give the pound a boost.
Equally, if COVID-19 infections continue to fall this week, the pound could strengthen. Global pandemic situation and market movements could also have an impact on sterling.
There will be a series of PMI data releases this week, starting with manufacturing PMI for July this morning.
GBP/USD chart over past year
EUR: Euro stronger due to positive data releases
The euro is stronger against the dollar this morning due to positive economic data from the Eurozone and dollar weakness.
Data on Friday showed second-quarter Eurozone GDP growth rate of 13.7% and a July inflation rate of 2.2%. It’s thought that these figures could prompt the European Central Bank to take a more hawkish stance on monetary policy.
There were also some positive data releases this morning, with retail sales in Germany jumping to 4.2% in June, much better than market forecasts of 2%. Year on year, they increased 6.2%, an improvement on the previous reading of -1.8%.
This week, there will be a series of PMI data, retail sales figures and more.
USD: Dollar weaker ahead of Non-Farm Payrolls
The dollar is weaker this morning ahead of Non-Farm Payrolls data, which will be released at the end of this week. This data could be key in influencing the Federal Reserve’s next actions on monetary policy.
Speaking at the end of last week, Fed Chair Jerome Powell told investors that interest rates were being left as they are and that any tapering of monetary policy would not happen until the job market saw more of an improvement. There were also some ‘dovish’ comments from Federal Reserve officials over the weekend who stated that the labour market would need to improve before tapering monetary policy.
PMI figures for the US will be released this week, followed by Non-Farm Payrolls on Friday. This is expected to show that 900,000 jobs were added to the US economy in July.