07/07 – Dollar fights back

07/07 – Dollar fights back

GBP: Chancellor Sunak keeps flashing the cash

EUR: Still trapped

USD: Services data prompts some optimism


The Chancellor’s latest round of giveaways continues apace with reports now of £3bn for green additions to houses and public buildings. His ‘mini-budget’ is due tomorrow but Chancellor Sunak will be taking questions in the Commons this morning.

One more political issue sterling watchers will have to keep half an eye on is the row between the UK and China over both the new security law in Hong Kong and whatever the government decides to do about Huawei infrastructure within the UK’s 5G network. Yesterday saw China warn the UK it will face “consequences” if it chooses to become a “hostile partner”.

As we noted yesterday Bank of England Chief Economist Andy Haldane speaks this evening and given his recent belief that the UK economy is heading towards a V-shaped recovery, his views could offer further sterling strength.


The single currency went on a decent run higher yesterday but has since given back almost all of those gains, with investors seeing through the rather thin optimism that recent news on the rate of increase in Covid-19 cases in the US was able to bring.

Our outlook for EURUSD remains constructive with the twin effects of an extraordinary level of stimulus and the upcoming general election both pressurising the USD lower. For now, it seems that EURUSD is struggling to break the 1.1350 level.

US Dollar

US bond yields have remained relatively quiet overnight and while Chinese equities have leapt higher once again, the fact that European or US markets haven’t followed suit is keeping the USD from weakening too much.

Yesterday’s non-manufacturing sentiment numbers were greeted positively although as with all US data at the moment the caveats of the jobs market and the continued increase in Covid-19 cases remain.


The Australian dollar is a little lower this morning after the State of Victoria announced a fresh 6 week lockdown in order to squash a recent uptick in Covid-19 cases. Earlier in the session the Reserve Bank of Australia had struck an optimistic tone by suggesting that the effects of the wider global contraction in economic activity were over for the country. They also held interest rates at 0.25%.

Have a great day.

Thanks for subscribing to our market reports!

You've been added to our Chief Economist's mailing list for his morning reports.

Jeremy Thomson-Cook

Jeremy Thomson-Cook

Jeremy has over 13 years experience working in the FX industry. As a specialist in political risk mitigation and currency hedging, he regularly advises clients on the day-to-day moves of the markets and the implications of fiscal and monetary policy on international businesses.