Currency Note

Key data and Fed meeting this week

By Carl Hasty July 26th, 2021

The pound is slightly stronger against the euro and the dollar this morning ahead of a busy week. Bank of England official, Gertjan Vlieghe, will speak later today and the markets will be listening for any comments surrounding inflation, especially after PMI figures on Friday revealed that rising inflation contributed to slower economic growth in July.

Inflation and monetary policy will be the words on everyone’s lips ahead of the Federal Reserve’s latest meeting, which will conclude on Wednesday. It’s thought that officials could share more about the timing for stimulus tapering and could begin to taper policy towards the end of this year.

In Europe, all eyes will be on GDP data for Germany and the Eurozone at the end of this week, as well as sentiment data on Thursday.

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GBP: PMI data shows slow growth due to ‘pingdemic’

After weakening at the beginning of last week and making a gradual recovery from Wednesday onwards, the pound is trading around the same levels against the euro and the dollar this morning.

A series of PMI data came out for the UK on Friday, showing growth in the services and manufacturing sectors in the month of July but coming in below expectations. This is said to be due to shortages of staff and materials due to workers having to self-isolate because of contracting COVID-19 or being ‘pinged by the NHS app.

The data also showed that inflationary pressures are particularly high and are growing at an unprecedented rate, which could be a concern for Bank of England officials who take the view that higher inflation is temporary.

Later today, BoE official Gertjan Vlieghe will speak. This will be followed by a series of data throughout the week including housing prices on Wednesday and car production figures on Thursday.

GBP/USD chart over past year

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EUR: GDP data expected on Friday

The euro is strengthening slightly against the dollar this morning ahead of a key week for Eurozone data.

German consumer confidence data will be released on Wednesday, expected to show a slight improvement from last month’s reading. This will be followed by a series of sentiment figures for the Eurozone on Thursday and GDP data for the Eurozone and Germany on Friday.

Last week, the euro showed little reaction to the European Central Bank’s press conference, which revealed a ‘dovish’ stance towards inflation and interest rates.

USD: Fed meeting this week

The dollar remains at fairly strong levels against a basket of currencies ahead of the Federal Reserve’s monetary policy meeting this week.

The two-day meeting will conclude on Wednesday and whilst a change in policy is not expected, the markets will be listening out for any clarity over when the Fed will start to taper its monetary policy programme. It’s thought that tapering could begin as earlier as the fourth quarter of this year.

There will also be several important data releases for the US this week, including GDP figures on Thursday.

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