Currency Note

Sterling continues to gain while the euro continues to weaken

By Alex Bennett August 24th, 2022

BoE to decide on the interest rate today.

Today the pound continues to gain strength against the euro despite UK PMI disappointing market expectations yesterday. Against the dollar however, sterling is weaker this morning.

In UK politics, Tory leadership candidate Liz Truss plans to reduce the Bank of England’s independence. Rival Rishi Sunak on the other hand, fears this could “spook investors” and “be bad for us all”.

Tomorrow, eurozone market watchers will be keeping a close eye on German markets as more big data will be released. The Ifo Business climate is expected to fall again from 88.6 to 86.2.

In the US, orders appear to be slowing down. The latest durable goods ordered predictions have fallen from 1.9% to 0.8%.

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GBP: Sterling still strong against euro but falling behind dollar

This morning the pound continues to gain strength against the euro despite UK PMI disappointing market expectations yesterday. The PMI reading was forecast at 51.3 but fell below expectations to a more pessimistic 46. Services however remained strong.

Against the dollar, sterling is weaker this morning.

In political news, Tory leadership candidate Liz Truss has indicated she would review the Bank of England’s mandate. Her Rival Rishi Sunak however continues to strike at Truss’ economic policy and told Sky News he thinks changing the Bank’s mandate would be a mistake” which would “spook international investors” and ultimately be “bad for all of us.”

GBP/USD over the past year 

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EUR: Euro weaker against both sterling and the dollar

Yesterday the euro continued to fall, and this morning it continues to weaken against both sterling and the dollar despite Germany’s latest PMI data beating market expectations.  Figures were expected to fall to 47.8 from 49.3 but came in at a more optimistic 49.8.

Data on Germany’s 10-year Bund Auction will be released today. ECB board member Isabel Schnabel said that “the central bank’s inflation outlook has not improved since the July 50bps rate hike”.

Tomorrow, eurozone market watchers can expect more big data from Germany as the Ifo Business climate data will be announced. The business climate indicator is expected to fall again, this time from 88.6 to 86.2.

USD: The dollar gains strength against sterling and euro

Today the dollar is stronger against sterling. Against the euro, the dollar has also gained strength.

Lots of interesting data from the US today, Durable goods ordered MoM will be released this afternoon. In last month’s release, figures beat market forecasts for a 0.5% decrease and rose to 1.9%. This was a good indication that business spending plans remained strong despite higher interest rates and inflation. The latest predictions however suggest those plans may slow down with figures at a much lower 0.8%.

More data to be released this afternoon includes pending home sales MoM, and Neel Kashkair from the US Federal Reserve will speak this afternoon.

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