The pound is stronger against both the euro and the dollar this morning following sizeable gains on Thursday.
This fresh strength is thought to be down to a combination of comments by Bank of England Governor Andrew Bailey around interest rates and the European Central Bank announcing that it will start to slow the pace of its pandemic bond-buying programme.
The dollar has weakened this morning and investors will now be paying close attention to today’s US PPI figures which could give the greenback new direction.
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GBP: Several factors benefit sterling
The pound has strengthened against the euro this morning, breaking the 1.17 mark for the first time in two weeks. Sterling is also stronger against the dollar.
Sterling’s fresh strength comes from a combination of comments by Bank of England Governor Andrew Bailey around interest rates and the European Central Bank announcing that it will start to slow the pace of its pandemic bond-buying programme.
Speaking on Wednesday, Bailey revealed that during their August meeting, half of the monetary policy committee members thought an interest rate rise would be needed.
In employment news, the number of people on furlough fell to a new pandemic low in July, down 340,000 than the month previous. GDP figures for July were more disappointing, coming in at just 0.1%. Supply chain problems and the ‘pingdemic’ are thought to be behind this.
GBP/USD chart over past year
EUR: ECB to slow pace of stimulus programme
The euro has weakened against the pound but has strengthened against the dollar after the European Central Bank confirmed that it would begin to slow down its pandemic bond-buying programme.
This decision to “moderately lower” the pace of the PEPP comes after eurozone inflation reached 3% in August, the highest rate in a decade. Interest rates have been left unchanged.
When asked about the decision, ECB president Christine Lagarde claimed that the Bank was not tapering, but rather “recalibrating” in order for “favourable financing conditions to be maintained”.
USD: Jobless claims figures hit new pandemic low
The dollar has weakened this morning against both the pound and the euro.
Jobless claims figures were at their lowest level since before the pandemic, down to 310,000 which beat market expectations. This encouraging data continues to suggest that the world’s largest economy is recovering well. This reading also happens to be the last before the government’s pandemic aid unemployment benefit scheme ends.
Markets will now be looking at today’s US PPI figures which could help strengthen the greenback. Additionally, they will be paying close attention to the ECB’s monetary policy meeting minutes, which are due to be released at around 9:30am GMT, and will confirm yesterday’s statements around slowing the pace of the eurozone stimulus programme.