Market Update 14th June-20th June
Where you will be able to keep up to date with all the latest changes in the currency market
Last night we saw that awaited confirmation that the U.K is set to delay “Freedom Day” for four weeks till the 19th July. This is expected to have a devastating impact- especially on the hospitality sector for which many business leaders had initiated plans to open fully on the 21st June. This decision comes off the back of a rise in cases linked to the new “Delta Variant” of Covid-19, which currently makes up 91% of the Covid-19 cases. We are now in a race for vaccinations to be completed and it is expected that by the 19th July every adult would have been offered their first vaccine.
It does appear this had been factored in as the effects were not as significant as expected on Monday and the Pound made some gains against the Euro in early trading. In other news, we have seen the U.K sign a free-trade deal with Australia which is expected to boost international trade between these nations. We also saw this morning that the UK Unemployment rate drops however the number of staff on payroll still half a million lower than in February 2020 and Rishi Sunak has rejected business leaders calling for furlough to be extended beyond October stating we are “on target” in regards to jobs figures. Throughout this week we will be monitoring the continuing rise in Covid cases, but we also have inflationary data on Wednesday and Retail sales Friday which are expected to cause some volatility.
Over the last week we saw the ECB interest rate decision on Thursday which saw interest rates kept at record lows. This was expected but we did not see that the EU indicated a chance in the coming weeks. There are some positive indications for the EU moving forward however, we are seeing an increase in travel between EU nations bolstering Tourism’s sectors where many have been depleted over the pandemic. We did see that Eurozone Industrial Production figures was offset later in the week and the Euro moved towards a three-month low against the Pound.
Policymakers echoed that it’s too early to talk about the end of the Pandemic Emergency Purchase Programme (PEPP) which would indicate there are fears that restrictions and economic stress is here for the foreseeable future on the continent. Many EU nations are catching up with vaccinations, but there are fears that EU policy makers won’t make drastic changes until every member is at the 80% vaccination mark. We will also monitor CPI figures released this week
We have seen the US Dollar begin to bounce back slightly last week against most major currencies- we saw over 1% gains against the Euro and GBP. This is off the back of some positive data sets towards the back end of the week including falling jobless claims. However, there are a lot of inflationary fears in the U.S Economy which is cause for concern. We saw on Thursday, that C.P.I figures came at 5% where most central banks aim for an inflation rate of 2% and although many aspects of the US Economy are positive. The value of the US Dollar will be significantly lower should we see this trend continue
As we do move towards post-pandemic life it is expected the US Dollar could continue to weaken without a change in monetary policy to combat these effects as the US are currently running a trade deficit, a weaker dollar will affect the ability to import drastically. Over the next week will monitor the US interest rate decision very closely as any indication of an increase in rates could have drastic effects on the US Dollar. There were talks that if Non-Farm payrolls came back better than expected earlier in the month, an increase may have been on the cards, but with inflationary figures so high this could be a sign an interest rate increase may be required.