07/07 – Dollar surges as US data stokes recovery concerns

Jeremy Thomson-Cook
Jeremy Thomson-Cook 07 July 2021

GBP: Following the euro

EUR: Little hope versus a strong USD

USD: Weak services sentiment drives haven risk

Sterling

The pound made a brief run towards the high of the range in GBPEUR yesterday before dollar buying took over as the main move in markets. We still think that GBPEUR has a future above the 1.1720 mark although it may have to wait for Friday’s run of output data and a speech from Bank of England Governor Bailey to achieve that.

The government’s decision to relax a lot of the rules around Covid-19 may have generated concern in medical and political circles but, for now, markets remain sanguine about the increase in cases.

Euro

It was another tough day at the office for the single currency but then again, if you have been reading these reports recently you will know we entirely expected such a move. We are unsure what will reverse this trend in the short term and look for further losses for the euro in the coming weeks. 

USD

Dollar strength came through yesterday as markets tipped into nervousness over three main facets of the global economy right now; weaker oil prices, a poor US sentiment number and moves by the Chinese government to crack down on some in the tech sector.

The first two link very neatly into the conversation on inflation and growth through which everyone is marking currencies at the moment. We are now in a position that tonight’s Federal Reserve minutes may not be the green flag to US recovery bulls as it had been seen only a few days ago.

The environment has definitely shifted to being one wherein dollar selling will be seen as something to do cautiously and that will limit the ability of GBP, EUR and other G10 currencies to extract strong gains against the greenback. 

Elsewhere

A stronger dollar and weaker commodity prices played havoc with NOK, CAD, AUD and NZD yesterday with the latter two also damaged by China’s announcement on tech companies and their desires to IPO on foreign stock markets. Into the Federal Reserve we expect the USD to remain strong and the above currencies to spend a lot of today on the back foot.

Market rates

Today’s interbank rates at 08:12 against sterling. Movement vs yesterday.

Euro €1.168 ↑
US dollar $1.380 ↓
Australian dollar $1.838  ↓
South African rand R19.89 
Japanese yen ¥152.7 

Have a great day and remember, it’s coming home.