Pound remains stable and which way next?
The Pound has remained in a relatively tight range against both the Euro and the US Dollar recently as economic data to end the month of August was few and far between.
However, as yesterday was the first official day of autumn and as children return to classes as of today could we be looking at the start of the fourth wave for England and the rest of the UK?
Many businesses in the early part of summer had issues with staff shortages as well as the issues created by the ‘pingdemic’ This caused uncertainty for the economy as some industries were negatively affected which caused issues for profits and resulted in some experiencing short term closures.
The more positive news since the middle of August is that people will not need to follow the same isolation rules which allows less social distancing and means that more people can continue about their daily business.
However, as we saw during the course of last winter the cases rose dramatically so if we see more hospitalisations and more deaths could this increase the chances of another lockdown which could in turn have a detrimental impact upon the value of the Pound.
UK borrowing levels still remain high, but we are still less than the record level set in June last year. However, the positive news is that the borrowing levels in comparison to the UK’s GDP level are manageable and are therefore not too much of a concern.
These headline figures are concerning but if we delve deeper into the reports the debt servicing costs compared to GDP are still relatively low. The one factor that could influence the Pound in the near future is the uncertainty surrounding Afghanistan so make sure you keep a close eye out on the events that may unfold in the short term.
Yesterday morning the Eurozone announced a number of different data including that of Eurozone unemployment levels as well as manufacturing data across the zone.
Unemployment on the continent came out exactly the same as predicted with levels of 7.6% which confirms that the jobs market on the continent remains solid. However, across a number of different countries we saw indifferent data releases. German Retail Sales showed a fall against expectation with year-on-year data showing a drop of 0.3%.
Manufacturing data in Germany as well as the Eurozone also caused a little concern with a fall in both sectors against expectation.
However, the indifferent data has done little to impact the value of the Euro as arguably the markets are looking forward to next week’s ECB meeting. If we see any changes to the current monetary policy this could start to influence the next movement for Euro exchange rates.
This morning the Eurozone will publish its latest Producer Price Index figures for both month on month and year on year. Expectations for the last twelve months are for 11% so be prepared for any difference when the data is released at 12pm today.
We end the week with Eurozone retail sales data at 12pm on Friday afternoon which could see a lot of volatility for Euro exchange rates as we end the week.
Moving forward to next week and the European Central Bank are due to hold their latest monetary policy decision. The ECB have adopted a rather cautious tone recently and are still dealing with the effects of Covid-19 on the economy.
They have already apportioned an enormous amount of money to cover the fallout in the Eurozone so any mentions of a change to the current monetary policy could cause movement for the Euro.
US Dollar gains vs the Pound and the Euro
The US Dollar has continued to improve over the last few weeks against both the Pound and the Euro.
In times of global uncertainty the Dollar is often the benefactor as global investors will often move money into the Dollar and use it as a safe haven currency.
The instability of the issues surrounding Afghanistan has seen the Dollar strengthen to its highest rate to buy Pounds in many weeks creating some excellent opportunities for anyone looking to convert US Dollars into Pounds or Euros.
With the US troops having now left the country the Taliban has taken control of the country so it will be interesting to see how this situation unfolds and its impact on US Dollar exchange rates.
We end the week with a huge amount of jobs data for the US on Friday afternoon including average earnings, unemployment data and non-farm payroll data for the world’s leading economy.
Non-Farm payroll data which measures jobs outside of the seasonally affected agricultural industry is due out with the expectation of 943,000 new jobs created.
The previous figure was for 750,000 so anything higher could see an improvement for the Dollar so make sure you keep a close eye out for this particular data release.
The next FOMC meeting to be held in the US takes place on 21st-22nd September and the Fed will announce their latest monetary policy decision.
Expectations are to keep interest rates on hold and any sign of interest rates looking to rise in the near future could see some further Dollar strength as we move forward towards the end of the month.
Oil prices have started to fall recently which has caused the US Dollar to lose a little of its recent strength.
As the value of oil is measured in US Dollars any dip in the value of the price of oil can have an impact on the value of the US Dollar so make sure you pay close attention to the value of oil prices in the near future if you’ve got a pending US Dollar requirement.
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