12/08 – UK GDP shows strong growth in Q2

12/08 – UK GDP shows strong growth in Q2

GBP: GDP up 4.8% in Q2

EUR: Slide only eased by US inflation

USD: Inflation report falls flat


UK GDP rose by 4.8% in the 2nd quarter of this year, matching estimates and showing that the UK economy is likely to regain the level of output it had reached pre-pandemic by October or November of this year.

Sterling’s reaction has been muted – currencies don’t tend to move much when estimates are hit and not exceeded – but this announcement will continue to lend credence to the knowledge that the UK economy is outperforming that of the Eurozone and matching the US.

The notable downside in the release were misses on both industrial and manufacturing production numbers as well as trade, suggesting that supply chain issues and HGV driver shortages are having an impact on both manufacturers and hauliers.

GDP is also a very backwards looking measure and so, more crucial for sterling in coming months will be how high consumer demand has remained as cases of the delta variant increase.


The softness of that US inflation number was enough to take away some of the downward momentum for the euro, although we do not see this lasting long. With equity markets hitting new highs and bonds remaining quiet, it seems that the euro will continue to be used as a funding currency for riskier positions elsewhere on an ongoing basis.

We remain bearish on the euro and see GBPEUR moving towards 1.1940.


Yesterday’s inflation report was a bit of a damp squib, disappointing against some optimistic projections and taking the steam out of the dollar’s rally. Nevertheless, one slightly soft reading is not enough to dissuade the Federal Reserve from publicly indicating that the discussion on tapering has begun and hence dollar’s unwillingness to lose too much ground.

We remain of the belief that an announcement will be made at the Jackson Hole Economic Symposium at the end of the month with a further timeline announced at the Fed’s next meeting on September 22nd.

In the meantime, comments from President Biden on oil and gasoline prices have raised a question around what the US wants from oil producing countries. Sure, Biden wants cheaper oil and gasoline for US citizens but if OPEC fails to cut prices or raise output do we see more people position themselves for a stronger USD?


Another lockdown in Australia, this time in Canberra, and the AUD is once again on the back foot. Brisbane and Sydney are also locked down and have been for a number of weeks and we do not expect Australia to exit this back and forth of in and out of lockdown until summer returns to those shores.

Market rates

Today’s Interbank Rates at 08:22 against sterling. Movement vs yesterday.

US dollar$1.386 
Australian dollar$1.883 
South African randR20.41 ↑
Japanese yen¥153.1 ↑

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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.