Market Update 19th July – 25th July

Where you will be able to keep up to date with all the latest changes in the currency market

GBP

The British Pound is heading towards a three month low as england lifted its final coronavirus restrictions amid scepticism amongst scientistis due to a spike in infections. News that the double vaccinated Health Secretary Sajid Javid is isolating after having contracted the virus  is causing concern and highlighting risks to econmoic recoveries. The recent rise in cases is causing huge concern that if all industries and measures are lifted and reopening that an increase in hospitalisations will follow this could discourage some individuals and households from resuming normal social, consumption and activity habits.

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As well as this UK inflation rate hit a three year high of 2.5% and it will be important to look out for 11:00 Monday morning as monetary Policy Comimittee member Johnathon Haskel addresses the University of Liverpool about the risk of econmic scarring. The Market will be listening closely to Haskel to hear if he says anything which supports the notion the Bank of England could take action if temporarily high inflation pressures continue to emerge stronger than anticipated by the Bank. Uk retail sales for June are released on Friday and it’s widely expected that we will see a decline for a second month in a row, so sterling is expected to see a lot of volatility this week balancing both positive and concerning news on the rise in infections.

EUR

Over the last week Germany has seen record rainfalls and floods. Where at least 42 people have died, and dozens were recorded missing last Thursday. In addition to this Belgium and the Netherlands were affected by severe flooding which is a further blow to the economic recovery. Angela Merkel has told her nation that a recovery plan will be in place within days, after visiting some of the areas that were worst affected by the country’s floods. 

The pound lost gains against the euro and this is likely because of the continued rise in virus figures, with the UK seeing 42,302 new cases, which is the highest daily figure since mid-January. That may be tempered by rising cases in Europe, with Italy reporting 2,153 cases and that was up sharply from 1,534 the previous daily figure. The European Central Bank is also watching the data ahead of its meeting on Thursday, and the ascending infections could impact the currency; perhaps lead to extending the bond-buying scheme. More euros printed could also weigh on the currencies progress.

USD

Over the past weeks we have seen the USD continue to claw back against the Euro and USD from the near three-year lows seen in the first half of 2021. Following the Federal Reserves decision to increase interest rates in 2023, the USD has recovered by 4% against GBP and over 3% against the Euro, however inflationary fears have stopped it rising even further. This week marks the lowest GBP/USD rate we have seen for three months; however, Economists at Bank of America have downgraded their forecasts for U.S. economic growth to 6.5% this year, from 7% previously, but maintained their 5.5% forecast for next year. As for inflation, the bad news is it’s likely to remain elevated near term. 

expecting to hear from Joe Biden in the near future on the opportunities for U.K and EU tourism. The industry is measured at $10 Billion per week and currently, despite US travellers being allowed into the EU and U.K, the same is not for visitors heading in another direction, however due to the surge in Delta variant cases across Europe, this could affect his decision. We will continue to monitor Covid-19 cases in the United States, as they are currently on the rise, but we will also be watching around other parts of the world as the US Dollar benefits in times of turmoil due to its safe-haven status.

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