Currency Note

Sterling starts September on even keel

By Chris Nye September 7th, 2021

Sterling remained steady against most of its major competitors over the past 24 hours while clawing back some of last week’s losses against the non-US dollars.

The first week of September has been unseasonably quiet this year. In the first week of September 2020 there was a 2.5% drop compared to EUR, and the previous three years there were modest but determined rises in the strength of sterling compared to the single currency. Not this year, however.

In the business news today, a report from the UK’s Insolvency Service has shown employers planning fewer job cuts than expected, meaning that a surge in unemployment as the furlough scheme ends looks less likely.

The third runway at Heathrow has had a major barrier removed as the Department for Transport has refused to allow green concerns to delay the project.

At the other end of the country, in Northumberland Britishvolt started work on Europe’s second-only Gigaplant, able to build 300,000 electric car batteries per year.

European stock markets had their strongest day for six weeks as the reverberations of America’s very poor employment data on Friday (non-farm payrolls) continued. If high unemployment continues, goes the thinking, so must government assistance, with no tapering of stimulus expected.

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GBP: Supply woes delay recovery

Sterling starts the day slightly on the back foot against EUR and USD, but only slipping part way back towards last Tuesday’s position.

Yesterday’s Construction purchasing manager’s index (PMI) came in slightly below expectations at 55.2, compared to last month’s 56.5 and an expectation of 58.7. This is all being blamed on supply problems for materials and transport. Prices of concrete, steel, timber and fuel have risen sharply.

This morning the Halifax House Price Index came in at a 7.1% rise, although below expectations and below last week’s Nationwide index which showed an 11% rise, this still represents the highest priced UK house prices ever, at an average of £262,954.

A quiet early part of the week for data will liven up on Friday with GDP and industrial data, but look out before that for Europe’s interest rate decision on Thursday.

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EUR: Traders analyse data ahead of ECB decision

The single currency had a positive day against sterling while slipping slightly against USD, in a decidedly mixed day for data and ahead of an interest rate decision in two days time.

In Europe’s largest economy, construction PMI slipped badly in Germany, to 44.6, showing a serious contraction in building. On the other hand, factory orders in Germany rose in July by 3.4% against an expected fall of 1.2%.

At 10am today a mass of data will need untangling ahead of the European Central Bank’s interest rate decision, including the ZEW Economic Sentiment Index for Germany and the Eurozone as a whole.

USD: Dollar steadies but jobs data effect ripples on

The dollar had a positive day yesterday, beating almost all major currencies. However, the improvement was only slight and the dollar remains well down so far this month.

There were no data releases yesterday, being Labor Day, or today, but the fallout from Friday’s non-farm payrolls continues, with its likely chilling effect on pandemic stimulus tapering.

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