Market Update 28th June-4th July

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

GBP

Over the past week we saw the Bank of England’s monetary policy meeting which many analysts had predicted would indicate a turning point towards a reduced amount of quantitative easing or a change in interest rate to combat inflationary pressures we are seeing since the re-opening of the economy. We have seen U.S inflation rise to 5% and there are concerns the U.K could follow a similar path. However, decision makers indicated the Bank would not change interest rates and would continue along a similar path with bond-purchases.

Turn or go straight street signs on asphalt.

Following this, the pound fell away from 3 month-highs against the Euro and towards a two-month low against the US Dollar. The U.K has now vaccinated well over 80% of adults with everyone above the age of 18 now eligible for a vaccine, all indications are that the economy will open fully in July, as despite rising cases of the new Delta variant, deaths and hospitalizations remain low. Over the next week we will continue to monitor the rising cases in the United Kingdom as well as Market P.M.I data Thursday which will been the main indicators this week for the Pound.

 

EUR

Across the Eurozone we have seen rising Delta Variant cases which have sparked some concerns following the slowed progress the EU have seen in vaccination in comparison to their British and American counterparts. The Euro suffered in previous weeks following the United States interest rate decision.

In spiral slow journey

Both seen as safe assets, the extra returns the US Dollar now offers investors makes it a much more lucrative product and thus we saw plight from Euros to US Dollars following this decision which saw us drop to the lowest EUR/USD rate we had seen for over three months. This week we will be monitoring CPI figures to see if the Eurozone is following a similar path to the U.S and U.K and if there may be some inflationary pressures in the coming months.

USD

Last week we saw the confirmation of the United States infrastructure stimulus proposed by Joe Biden and amounting to over $1 trillion. This package was intended to give a much-needed boost to the economy following the restrictions seen since the beginning of the pandemic. However, there are now some concerns due to C.P.I figures- showing inflation at 5%- that this stimulus package could add to inflationary pressures.

Manometer measuring pressure

Following this the Federal Reserve have announced that interest rates will rise in 2022 to combat these pressures. We have seen the US Dollar begin to strengthen significantly since and since the Federal Reserve decision we have seen the US Dollar gain by over 2% against the Pound and the Euro.  Over the next week a lot of eyes will be on Non-Farm payrolls towards the end of the week, which is expected to show a pick-up in hiring which will indicate a boost in jobs and would likely strengthen the US Dollar should these figures be positive.

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