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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 UK licks its wounds from Sunday’s crushing loss to Italy, our currency experts discuss the market news in the run-up to July 19th. Here, we cover the much-anticipated CPI figures in the US, global investor sentiment and how it’s affecting currencies, the UK labour market and more.

If you feel that you or your business will be affected by any of the issues mentioned here, get in touch. Our specialists’ contact details are noted below. Alternatively, book a meeting. We can discuss your requirements, provide you with a rate and take you through some of our solutions.

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Marcus Beaumont
Business Development Executive

After the GBP/USD surge on Friday, the currency pair has been sitting reasonably steady at around 1.385.

As US CPI data is released this afternoon, we could see some volatility. The markets are anticipating a slowdown in inflation numbers: a month-on-month reading of 0.5 for June, down from the 0.6 figure for May.

If the markets are right, then it will bring the annual inflation figure down to 4.9%, down from 5% in May.

Although it may seem counterintuitive, lower inflation could harm the strength of the dollar. Right now, inflation and interest rates are the name of the game when it comes to foreign exchange.

A cool-down in the CPI numbers will give gravity to the argument that inflation is indeed ‘transitory’ and could take the Federal Reserve’s foot off the accelerator when it comes to raising interest rates sooner — something that could be a headwind for the dollar.

MBeaumont@privalgo.co.uk
+442071133702

Jack Nielsen
Business Development Executive

Yesterday, we had further confirmation that the removal of Covid restrictions will go ahead as planned on July 19th, despite some softening of the rhetoric around facemasks.

Although it should help the UK’s economic recovery, as now every business will be able to operate, the announcement has had little impact on the value of sterling. Everybody and their dog are primed for July 19th. It is very much priced into the markets.

What is more likely to move and shake the pound this week is global sentiment and equity markets. Last Thursday, we saw this come into play.

As investor sentiment dampened due to the unbridled rise in Delta cases, global capital gravitated towards the safe-haven currencies — the dollar, yen and franc, which all saw upsides.

While sterling didn’t do too bad, sitting largely middle of currency movements, we could see further developments this week.

JNielsen@privalgo.co.uk
+442045269777

John Hallahan
Business Development Executive

The UK’s optimistic outlook, thanks largely to everything getting back to normal on July 19th, could be hampered by the state of the labour market.

For one, we are now in the midst of furlough being phased out. Trade unions are worried that the rate at which people are coming off the scheme is lower than expected. In May, there were still 2.4 million employees on the scheme.

And according to research from the Resolution Foundation, the total amount of hours worked is 7% lower than pre-pandemic levels. This is the sort of data you see during a recession.

All this could take some of the shine out of the UK’s economic recovery. And in turn, affect the Bank of England’s enthusiasm around tightening monetary policy. Factors that could weigh heavy on the pound in the short term.

JHallahan@privalgo.co.uk
+442039221738

Patrick Oakley
Business Development Executive

July 19th is fast approaching and now we have further confirmation from the PM that the day will go ahead as planned.

While this should be good for businesses, as nightclubs will be able to open, festivals can go ahead, and companies can run at full capacity, the big date’s impact on currencies will be negligible.

It’s already priced into the markets.

What may move the pound is the fact that track and trace is continuing until late August. It’s worrying UK businesses that majorly employ young, unvaccinated staff.

Workers needing to self-isolate if they’ve been zapped by the app is leading to staff shortages. Some bars and restaurants have even had to close their doors while their workers wait to be allowed out. As cases rise, it’ll only get more severe.

Along with the worse-than-expected UK GDP figures last week, staff shortages could provide another headwind for the UK’s economic recovery. Another reason for the Bank of England to kick the raising-interest-rates can down the road.

POakley@privalgo.co.uk
+442081326561

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