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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 talked about the Bank of England’s August Policy Report and the potential effect it could have on the value of GBP. In the end, the central bank adopted a cautiously optimistic tone, setting an interest rate hike in the last two weeks of 2021.

This has kicked GBP upwards, reaching above 1.18 against the euro — the highest it’s been in 18 months.

This week, we look at the impact US non-farm payroll figures have had on cable, what to expect from Thursday’s preliminary GDP reading, and why the Johnson-Sunak fight might spell danger for GBP.

If you’re looking to take advantage of GBP’s recent gains, or are concerned about any of the looming event risks, then follow the link below. Request a quote and we’ll be in touch with you as soon as possible with a rate.

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Marcus Beaumont
Business Development Manager

Despite a relatively quiet week on the UK data front, we still have preliminary Q2 GDP to focus on this Thursday.

The market estimates a reading of 4.8%, while the Bank of England is acting even more bullish, anticipating 5%.

Unless there are any nasty disappointments, these readings would suggest that the UK economic recovery is ticking along nicely, and we’re well on our way to reaching pre-pandemic levels by the end of the year.

Over the last week, GBP/EUR ascended to over and above 1.8, thanks to the Bank of England’s relatively hawkish tone in its August Policy Review. If GDP figures for the last quarter are optimistic, this should provide further support for the currency.

If you’re buying pounds and selling euros, there could be some downside risks on the horizon for you. Get in touch today and we can discuss some potential hedging strategies.

John Hallahan
Business Development Manager

After being threatened with a demotion to Health Secretary, Rishi Sunak is now being backed by several fiscally conservative Tory MPs. They’re even calling it a ‘political death warrant’ for the Prime Minister.

Indeed, removing the conservative party’s golden boy will be negative for Johnson’s popularity within the party. Worst case scenario, there could be a power struggle.

This kind of political uncertainty may be restricting GBP’s recent advancements. After all, pundits generally see Sunak as a safe pair of hands — someone who maintains tight control over government spending.

Combined with some recent dollar strength, the squabble may have gone some way to cables 0.17% drop on Monday.

With an Autumn cabinet reshuffle upcoming, we may not have heard the end of this dispute. And indeed, it may continue to concern GBP sellers.

Brendan Leonard
Business Development Manager

A collection of factors on either side of the Atlantic could lead to sterling downside over the coming weeks.

First off is the US’s barnstorming non-farm payroll figures, released last Friday. Payrolls rose by 943,000, exceeding the expected 870,000; unemployment fell to 5.4% from 5.9%; and average earnings increased 4%, beyond the forecasted 3.8%.

All good news for the US economic recovery.

Moreover, it should go some distance to reaching the Fed’s ‘substantial progress benchmark’ — the level needed to bring forward tightening monetary policy — and in turn, provide support for USD in the near term.

The positive jobs report overshadowed the Bank of England’s hawkish tone in last Thursday’s meeting, essentially offsetting any gains made by GBP/USD towards the end of last week.

A thriving US economy, disputes between Johnson and Sunak in the UK, and the unbridled global spread of the Delta variant could combine to push GBP/USD down further in the weeks ahead.

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