Currency Note

Powell’s reappointment sends dollar to strongest since 2020

By Alex Bennett November 23rd, 2021

Powell remains as head of the Fed

The pound stabilised against the euro yesterday, although it has already began to slip this morning as positive European PMI data has reached the markets, dropping below €1.19.

The US dollar has strengthened against both GBP and EUR following the reappointment of Jerome Powell as Federal Reserve Chair. He is seen as more hawkish choice than his new deputy Lael Brainard, who was also in the frame for the top job, which encouraged the currency markets to support the dollar.

This week the Fed will have a huge range of data to chew over as it ponders the future of monetary policy.

Aready affecting the pound and euro is Markit PMI, a bit of bright news for EUR amid the rapid rise in Covid-19 cases in mainland Europe which is being combatted with new lockdowns.

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GBP: Pound starts to fall from highs

In common with the euro, sterling lost around 0.5% against the US dollar yesterday following the reappointment of Jerome Powell.

Against the euro sterling swung a little but ultimately stayed at 20-month highs. However, that has changed this morning, as PMI from the eurozone impresses the markets.

Later this morning we’ll see a flash reading for Markit PMI across services and manufacturing in the UK.

GBP/USD past year

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EUR: Falling against dollar, strengthening against pound

Yesterday was a relatively quiet day for EUR/GBP, but the single currency swung by around 0.5% against the US dollar, ultimately winding up a little weaker than the start of the day and at a 20-month low.

This morning Markit PMI for the eurozone’s two biggest economies, Germany and France, came in above expectations, strengthening the euro and recovering most of yesterday’s losses.

Shortly we will be seeing PMI for the eurozone as a whole.

USD: Dollar at new highs as Powell remains head of Fed

The US dollar was at its strongest against the pound since December 2020 and against the euro since July 2020 yesterday, on the promise of a more hawkish approach to interest rates from the Federal Reserve than might happen under a different chairman than Jerome Powell.

On the data front yesterday, existing home sales stabilised at +0.8% in October following September’s 7% leap last month.

Later today we’ll see Markit PMI across all sectors, while tomorrow there is a mass of data including durable goods, personal income, spending and new home sales. It will all build into a picture of the post-pandemic, pre-Christmas US economy.

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