Market Update 26th July – 1st Aug
Where you will be able to keep up to date with all the latest changes in the currency market
Over the last week there has been sterling strength against both the dollar and euro, after the initial scare from rising COVID cases dies down. In comparison to the high of 42,828 new cases on the 20th of July, that number has cut down to just 20,007 on the 27th of July. This has provided much needed confidence in a successful reopening of the UK economy. Sterling looks set to maintain further appreciation against both the euro and dollar after a positive COVID situation in the UK, and there are investor expectations that the Bank of England is on path to raising interest rates in 2022.
A rise in interest rates normally proves well for sterling, so any discussions surrounding this would be a positive for the currency. Economic analyst Ian Shepardson says that England are tracking the Scottish path with an 18-day lag, suggesting further declines in cases are to come.
The euro goes into the mid-week losing progress against both the dollar and sterling, after making strong gains towards the back end of the last week. With the effects of the flooding across Germany, Belgium and the Netherlands still causing problems, large areas of Europe will need economic support to help recover from the natural disaster.
Further volatility is to be expected later in the week, with GDP and CPI figures being released in France, Germany and Italy on Friday. The GDP released by the Eurostat is a measure of the total value of all goods and services produced within the Eurozone. It’s considered as a broad measure of the economic activity and health, with a rising trend having a positive effect on the euro.
The dollar has seen some weakness over the last few days, as COVID cases rise across the states and continue to do so into the middle of the week. Later this evening, the Federal Reserve announces their interest rate decision, and they are set to maintain a cautious tone amid the rising COVID cases. Unless a decision is made to increase the interest rate, it is unlikely that there will be dollar strength off the back of the announcement.
Furthermore, Federal Reserve Chair Jerome Powell will deliver updated guidance on plans to reduce monetary support for the economy in a speech later this evening. However, with the rising cases it may be difficult to reduce economic support at this time. Later in the week quarterly preliminary GDP figures are being released, with the first estimate being the main market mover and a positive result usually benefits the dollar.