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25 Eastcheap 2nd Floor
London EC3M 1DE
United Kingdom

+44 (0) 20 3880 0575

help@privalgo.co.uk

Office Hours
Monday - Friday
8:00am - 5:30pm

In the run-up to Jackson Hole Symposium, we spoke about how fluctuating global sentiment was shaping and reshaping the currency markets. With the symposium now done and dusted, it seems that playing fields have shifted. While the disappointing outcome of Powell’s message left the dollar reeling, other major currencies have stood their ground.

This week, we speak about what inflation means for the euro, where the dollar can go after Jackson Hole, and what the Afghanistan instability means for global currencies.

If you feel you or your business could be impacted by any of the subjects covered in this article, please get in touch. We can discuss your requirements, provide you with a quote and take you through some solutions that could help your situation.

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Jack Nielsen
Business Development Manager

This week’s high inflation data coming out of the eurozone is inspiring news for EUR bulls.

For context, eurozone inflation has reached the highest point in over a decade. Up from 2.2% in July, August’s reading of consumer prices came to 3%. This is majorly down to the zone’s economic rebound and supply issues — in particular, the ongoing shortage of semiconductors.

The aftermath is pressure on the ECB to slow down its €1.85tn pandemic emergency purchase programme — or tapering, in other words. It hasn’t gone unnoticed, evident in hawkish language from the ECB’s Holzmann, Knot, Lane and De Guindos, who are calling for a tapering debate sooner rather than later.

The euro has felt the benefit, EUR/USD recovered from last month’s year-to-date lows, and is now standing strong at around the 1.185 mark, while EUR/GBP pushed up 0.35% on Monday and Tuesday.

Marcus Beaumont
Business Development Manager

USD’s time at the top may be coming to an end after a multi-month roll. Hitherto, it’s been back the Fed’s hawkish monetary policy and up-and-down global risk sentiment.

The currency continues to lick its wounds from the Jackson Hole Symposium, where Jerome Powell’s speech proved to be a dud for USD buyers. The Fed Chair implied that tapering won’t begin until years end, and only when the US economy sees ‘maximum employment.’

In the wake of the talk, the dollar index fell 0.39%, while major currencies, GBP and EUR made gained against USD.

Now, USD bulls will be looking towards Friday, when non-farm payrolls for August will be released. The data could be somewhat of an inflexion point for USD. A positive outcome could galvanise USD to regain some of its losses, while disappointing news could provide scope for more downside.

Patrick Oakley
Business Development Manager

It’s funny how the currency markets work. In theory, the nightmare currently playing out in Afghanistan should provide USD with a boost. As global sentiment dampens alongside instability in the region, investors shift their money into safe-haven currencies, like the dollar.

But at the same time, some economists are suggesting that the US government’s gradual retreat from its position as the world police is darkening its global prestige. And as such, the world’s largest economy’s reputation as a safe haven may be waning.

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