Currency Note

Pound weaker ahead of Bailey speech

By Christopher Nye July 1st, 2021

The pound is still weaker against the dollar and trading around the same levels against the euro this morning ahead of a speech from Bank of England Governor Andrew Bailey today.

The markets are looking out for any comments from Bailey surrounding inflation and tapering monetary support. His speech follows warnings from outgoing Chief Economist, Andy Haldane, who said yesterday that the economy is at risk of ‘overheating’.

Yesterday, the European Union agreed to impose a 3-month delay on a ban to sell some British meat products in Northern Ireland. The proposed ban was originally introduced as a result of the Northern Ireland Protocol, but the EU have now given the UK a ‘grace period’ before this takes effect.

The dollar continues to strengthen against most major currencies ahead of the all-important Non-Farm Payrolls report tomorrow.

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GBP: BoE Haldane warns of higher inflation

The pound is under pressure against the euro and the dollar this morning ahead of a speech from Governor of the Bank of England, Andrew Bailey, later.

Weakness against the dollar is largely due to strength from the greenback, which was given a boost after the Federal Reserve indicated that it would impose an interest rate hike sooner than initially expected.

During his Mansion House speech, investors will be looking out for any comments from Bailey on interest rates and the future of monetary policy.

The Bank’s outgoing Chief Economist, Andy Haldane said yesterday that inflation could rise to 4% over the coming months and that the economy is at risk of ‘overheating’. However, it could be said that other officials don’t share the same view, as Haldane was the only person in the Monetary Policy Committee to call for a reduction to quantitative easing in the June meeting.

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EUR: ECB officials to speak today

The euro is still weak against the dollar, mainly due to dollar strength.

Retail sales for Germany were released this morning, showing a 4.2% rise month-on-month in May. This fell short of expectations of a 5% rise; however, increases were seen in sales of food, beverages and tobacco, textiles and clothing.

Several European Bank Officials will speak today, starting with President Christine Lagarde this morning. The markets will be listening for any comments regarding inflation and tapering monetary policy.

USD: Dollar strong ahead of Non-Farm Payrolls tomorrow

The dollar is strong against a basket of currencies this morning, continuing its strength from June’s Federal Reserve meeting.

It was also given a boost yesterday after a positive Private Payrolls report. The data showed that private businesses in the US hired 692,000 workers in June, higher than forecasts of 600K. It could be said that this bodes well for tomorrow’s all-important Non-Farm Payrolls report.

Later today, jobless claims and manufacturing figures will be released for the US.

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