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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

As the dollar continues its reign, it’s been a tough week for the pound and the euro. The pound-to-dollar rate has found it particularly difficult to recapture some of the ground lost after the Federal’s repositioned its monetary policy some weeks ago. A dovish stance from the Bank of England on interest rates, rising Delta cases, and to a lesser extent, a disgraced former health secretary, have all been weighing heavy on the pound.

In this week’s article, Privalgo’s Currency Specialists discuss the upcoming US non-farm payroll data, UK inflation, and much more.

If you feel that your business could be affected by the event risks posed in this article, get in touch with us. We can discuss rates, your business’s potential currency exposures, and solutions that could enable you to mitigate these risks.

Patrick Oakley
Business Development Manager

It’s a reasonably data-light week on this side of the Atlantic, apart from UK GDP. But unless something shocking happens, these figures will likely already be priced into the markets. 

Instead, investors will be looking across the pond to see the impact that Friday’s US non-farm payroll has on the currency. Although estimates aren’t yet set in stone, analysts anticipate a strong result, much like May’s figures (+559k). 

If the results come in over or as expected, they may encourage the Federal Reserve to consider bringing forward its tapering programme. This should spark more fire under an already bullish dollar. This could provide more weight on how the pound fairs in the coming weeks. 

Then again, a disappointing reading could take some wind out of the dollars sales, and perhaps leverage GBP/USD to regain some of the losses it made in the previous weeks. 

POakley@privalgo.co.uk
+442081326561

Devi Madray
Private Business Development Manager

Last week, the Bank of England shrugged off inflation worries, saying they were ‘transitory’. Tightening monetary policy at this time would hamper the UK’s breakneck recovery, according to the minutes from Thursday’s meeting. 

I can’t help but think that the BoE could be downplaying the threat of inflation. Right now, it’s bee-lining towards 3%. According to Andy Haldane, there’s not much stopping it from reaching above this high-water mark in the next year. 

What’s more, having interest rates so minuscule does nothing to prepare us for the potentiality of another recession. We’d need a decent bank rate in the bag to tackle the situation if the economy begins to contract again. Not having it would leave the Bank of England with nowhere to go.

DMadray@privalgo.co.uk
+442045269790

Marcus Beaumont
Business Development Manager

Yesterday, we saw 22,868 new cases in one day, the highest since January. Still, this has done nothing to stop our brand-new Health Secretary Sajid Javid from announcing he wants July 19th ‘Freedom Day’ to go as planned. 

Despite the positive energy, the call has been defective in stopping the pound from falling against the dollar. GBP/USD has reached a new weekly low, just about finding support at around 1.384. 

As we’ve seen, rhetoric about going ahead with July 19th as planned may not give GBP the boost pound-sellers are looking for. What investors are looking for, I believe, is some sure-fire evidence that the vaccine is completely Delta-variant-proof. Right now, nothing’s too certain, and that could be weighing on GBP. 

MBeaumont@privalgo.co.uk
+442071133702

John Hallahan
Business Development Manager

Unlike the pound-to-dollar rate, EUR/USD has had some solace over the last couple of days. The major currency has done well to recover some of the losses that were set in motion by the Federal Reserve hawkish shift on monetary policy. 

For euro sellers, there’s reason to be optimistic. There are reportedly three ECB board members who are in favour of bond tapering. Although it looks like Christine Lagarde doesn’t currently share this view, it shows there some level of appetite. 

Plus, although German inflation is slowing down — 2.4% in May compared to 2.1% in June — it’s still above the ECB’s target rate of 2%. If it remains higher than the ECB want it to be, it could further increase the desire to taper.

JHallahan@privalgo.co.uk
+442039221738

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