Currency Note

Record lows continue for pound sterling

By Alex Bennett September 2nd, 2022

This morning the pound has continued to weaken against the euro. Yesterday afternoon sterling saw its biggest fall against the dollar since 2016. Today, sterling regains some strength against the dollar but remains low overall. This follows the latest data on UK house price index, global recession fears and growing energy market concerns.

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This morning Germany’s balance of trade figures for July fell sharply against market expectations of €6.2bn. The latest data reveals Germany’s trade surplus declined to €4.9 bn. Fears of higher interest are also heavy in the eurozone as the European Central Bank is expected to make a 75 basis point increase on Thursday.

Two big data releases from the US today. Non-farm payrolls for August will be released this afternoon. US markets are predicting even more jobs will be added to the economy following last month’s increase.

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GBP: sterling continues to fall against euro

This morning the pound has continued to weaken against the euro. Yesterday afternoon sterling saw its biggest fall against the dollar since 2016. today, sterling regains some strength against the dollar but remains low overall.

No data releases from the UK today however on Monday, Britain’s next prime minister will be announced. Polls suggest Liz Truss is expected to win so markets will be “pricing in” this outcome. If Sunak wins against expectations, this could cause unexpected volatility for sterling.

In the wake of the increasing cost of living and energy market crisis, the treasury is preparing for emergency options for Britain’s next prime minister.

GBP/USD over the past year

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EUR: euro at a loss in amidst recession fears

Yesterday the euro weakened against both sterling and the dollar following the latest inflation data and the eurozone gas crisis. Today the euro strengthened against the pound but is still at a low overall. Against the dollar, the euro has weakened.

This morning the euro continues to lose strength against both currencies amidst the fears of higher inflation hikes from the European Central Bank. In the latest data, eurozone inflation rose to a record high of 9.1%. Despite recent hikes, the ECB is predicted to raise interest rates again, this time by 75 basis points on Thursday.

Eurozone data releases for this week conclude with Germany’s Balance of Trade and Spain’s unemployment change today. Germany’s balance of trade figures for July were forecast at €6.2bn and fell sharply against market expectations this morning. The latest data reveals Germany’s trade surplus declined to €4.9 bn.

Spain’s unemployment rate was released this morning. It was expected to raise to 5K and largely exceeded market expectations with figures of 62.1K recorded.

USD: Dollar weaker against both currencies

Yesterday the dollar was choppy against sterling but came out ahead of both currencies despite battling inflation. Today, the dollar makes a swift turn and is weaker against both sterling and the euro.

Markets have heard a number of speeches from the Federal Bank this week, yesterday Raphael Bostic spoke on inflation.

Two big data releases from the US today. Non-farm payrolls for August will be released this afternoon. US markets are predicting even more jobs will be added to the economy following last month’s increase. Today’s data sees predictions of 310k additional jobs to the economy
The US Unemployment rate for August will also be released today. Unemployment decreased in July to 3.5%, which was the lowest rate since February 2020. Markets are expecting these figures to stay the same for August.

Ahead of November midterm elections, President Joe Biden is criticising republicans. He says that “Maga forces are determined to take this country backwards”. This also follows new developments in Donald Trump’s criminal investigation.

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