25/08 – All quiet ahead of Friday’s Fed announcement

Jeremy Thomson-Cook
Jeremy Thomson-Cook 25 August 2021

GBP: Rangebound 

EUR: IFO could disappoint

USD: Consumer confidence should be supported by Pfizer approval

Sterling

GBPUSD and GBPEUR are stuck in their respective, well-established ranges with little, locally to break the pound out. Anecdotal data suggests that wage pressures in a number of sectors – driving, manufacturing, food prep and construction – have accelerated hard in the past few months and with furlough coming to an end in the next month or so, will we see those pressures decrease or unemployment remain high?

Euro

The single currency has most definitely stalled at the 1.1750 mark and with a weak IFO number for Germany expected to highlight a poor outlook for the country’s manufacturing base we don’t see the single currency driving much higher than where it is now.

A reading below 99.0 on the release at 9am could be enough to get GBPEUR back above 1.17.

USD

The dollar has tracked a pick-up in US bond yields overnight with investors shifting back and forth ahead of Friday’s Jackson Hole policy statement from the Federal Reserve. There really is very little else going on at the moment and market participants are limited in their desire to get ahead of the curve before Powell speaks at 3pm.

For now, the dollar stands to benefit from its safe haven status and the thoughts that the Federal Reserve may announce some form of tapering of stimulus on Friday afternoon. Consumer confidence could be supported by the FDA’s approval of the Pfizer vaccine this week and once the hubbub over the US’s withdrawal from Afghanistan dies down it may prove to be another reason markets fancy holding the USD.

Elsewhere

Two days of gains for the AUD seem to have been enough for investors with the currency now lower this morning. New South Wales reported a record number of cases of Covid-19 overnight and with the lingering weakness globally from delta variant cases and a poor vaccine response locally, the currency looks set to continue its poor run.

Market rates

Today’s Interbank Rates at 08:38 against sterling. Movement vs Friday.

Euro €1.169 
US dollar $1.372 
Australian dollar $1.893 
South African rand R20.49 
Japanese yen ¥150.6 

Have a great day.