Currency Note

Pound stronger on Bank of England comments

By Christopher Nye October 11th, 2021

The pound is stronger against the euro and the dollar this morning following comments from Bank of England officials. Over the weekend, both Andrew Bailey and Michael Saunders expressed worries over rising inflation and hinted at an earlier-than-expected interest rate hike, which gave sterling a boost.

The government will hold further talks on the energy crisis today, speaking with industry representatives this afternoon. Energy intensive industries such as ceramics, paper and steel manufacturing are calling on the government for support amid worries over factory closures.

After a disappointing Non-Farm Payrolls report on Friday, the dollar is slightly weaker against the euro and the pound this morning. The report revealed that 194,000 non-farm jobs were added in September, far lower than predictions of 500,000.

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GBP: BoE indicates need for interest rate hikes

The pound is strong this morning against both the euro and the dollar, boosted by comments from Bank of England officials over the weekend.

Governor of the Bank of England, Andrew Bailey, said that he is concerned about high inflation and said that action needs to be taken to prevent it from lasting. This indicates that he may be in favour of raising interest rates soon.

Bailey’s message was followed by rhetoric from BoE official Michael Saunders, who expressed worries over labour shortages causing wages to spike, feeding into higher inflation.

Balance of trade and GDP figures will be released for the UK this week, showing how the economy performed in August.

GBP/USD chart over past year

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EUR: German inflation data this week

The euro is weaker against the pound this morning but is strengthening slightly against the dollar. This follows a disappointing non-farm payrolls report on Friday, which impacted the greenback.

The first half of this week is busy with data releases in Europe. Economic sentiment figures for Germany and the Eurozone as a whole will be released tomorrow, followed by inflation rate data for Germany on Wednesday.

German inflation is predicted to come in an 4.1%, higher than the previous reading of 3.9%. If this occurs, the markets will be listening closely to comments on monetary policy and interest rates from the European Central Bank.

USD: Non-farm payrolls disappoint

The dollar is stronger against most currencies this morning, but weaker against the pound and the euro following a disappointing non-farm payrolls report on Friday.

The report revealed that 194,000 jobs were added to the US economy in September, far less than predictions of 500,000 and lower than August’s figure of 366,000. Despite the figure coming in lower than expected, the number doesn’t impact expectations that the Federal Reserve will begin to taper monetary policy next month.

The latest inflation rate data for the US will be released on Wednesday afternoon, followed by FOMC meeting minutes in the afternoon. There will also be speeches from Federal Reserve officials throughout the week.

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