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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

Last week, we spoke about GBPs impressive recovery from multi-month lows. We put this predominantly down to an inspiring drop in new Covid cases. Yet, GBP’s upward momentum had the potential to be marked by reemerging Brexit woes and the staff shortages brought on by the ‘pingdemic’.

One week on and GBP seems to be holding its ground against most major currencies. That said, GBP/USD and GBP/EUR have struggled to break through key resistance levels.

With the Bank of England’s August Policy meeting and US jobs data coming at the end of the week, it proves to be a data-heavy few days. Our Currency Experts discuss what’s happening and how it may incite some volatility.

If you or your business has foreign exchange requirements, and you think you could be affected by what’s discussed below, then get in touch. We discuss your requirements, provide you with a rate and take you through some of our currency solutions.

Book a chat with a Currency Specialist

John Hallahan
Business Development Manager

Potentially the most galvanising event comes this Thursday in the form of the Bank of England’s August Policy Report. 

This is predominantly down to the fact that experts can’t agree on what impact the meeting will have on the value of GBP.  

While the markets concur that the BoE will keep the bank rate at 0.10% and do little to change asset purchasing, economists aren’t clear on how sterling will react. It’s now more about the tone of the BoE. 

If the tone is hawkish, then we could see GBP/EUR push above its resistance level of 1.1764. If the tone is more dovish than expected, and GBP/EUR fails to break through, then it could be a sign that the resistance is here to stay. 

In foreign exchange, it’s the news that you don’t expect that starts fires. The fact that there’s dissonance on where GBP will go on Friday, means that any updates aren’t likely priced into the markets. 

This poses a risk for you if you’re trading in GBP. Get in touch today. We can speak about potential strategies that can enable you to hedge against or take advantage of the potential risks.

Patrick Oakley
Business Development Manager

Covid cases in the UK continue to fall. According to the seven-day moving average, the number of new cases of the Delta variant is down to around 424 per million, down from 702 per million on July 21st, when it was at its peak. 

Happy days for the value of GBP, right? 

To an extent, yes. Analysts have differing opinions on what effect Covid new stories will have on sterling over the coming weeks. 

On the one side, it looks like the UK’s reopening gamble paid off. Apart from the losses arising from the ‘pingdemic’, it looks like the UK economy can continue with its recovery. Now everything’s open as usual, businesses can thrive and the nation’s GDP can expand. In turn, this could encourage the BoE to tighten its monetary policy and further ignite GBP’s recent momentum. 

Then again, it’s not just UK news that impacts GBP. Known as pro-cyclical currency, sterling moves in tandem with global investor sentiment. When sentiment dampens, GBP tends to push down.  

We saw this two weeks ago when the global markets panicked at the prospect of a third wave. GBP/USD dropped half a per cent. Now that Covid concerns are escalating once again, it could be a bumpy few weeks for sterling.

Harrison Hickey
Business Development Manager

US employment data is out this Friday, and it’s debatable how positive the results will be. While some economists predict unemployment to drop from 5.9% to 5.75%, others believe the situation to be rockier. 

Republican-led states have moved quicker in removing unemployment benefits. In theory, this should have encouraged those not working to get onto a payroll. In reality, the opposite has happened. 

Thanks to Delta-virus worries, the states that are removing unemployment support are actually seeing lower hiring activity. According to Oxford Economics, economic activity has softened in Republican states like Florida, Mississippi, and Arkansas. 

These findings will do nothing to encourage the Federal Reserve to touch its asset purchasing programme. And as such, Friday’s employment report will do little to boost the value of USD. 

With the potentially hawkish BoE August Policy Report coming on Thursday, it will be interesting to see where GBP/USD is at the end of this week.

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