26/08 – Blowing hot and cold

GBP: Haldane risk at 5pm

EUR: German confidence numbers inject some life

USD: Stable ahead of tomorrow’s speeches

Sterling

Sterling markets are thumpingly boring at the moment although event risk does increase a portion today with a speech from Bank of England Chief Economist Andy Haldane speaking this evening in Edinburgh. Haldane has been the main cheerleader of a v-shaped recovery for the UK economy following the pandemic and while we have seen sharp recoveries in both inflation and retail sales recently, the wider economy remains very much in the economic trough.

A change in Haldane’s rhetoric today would likely be enough to move the pound lower, should his views point to a slower rebound. His boss, Governor Andrew Bailey, is speaking on Friday and will likely give a more balanced view.

Euro

Germany’s confirmation that it will keep its furlough scheme running until the end of next year has helped the euro remain above the 1.18 level this morning although the wider rally in the euro still looks very tired and primed for a reversal.

The announcement comes as confidence numbers from the German economy released yesterday showed a slight increase in business sentiment with a pick up also in expectations for the future.

Once again, the European data calendar is quiet, it is August after all.

US Dollar

Strong homes sales and manufacturing data from the State of Virginia was enough to keep the dollar supported yesterday although we fully believe that traders will continue to use dollar strength as an excuse to add to their positions pushing the dollar lower such is the level of conviction that markets have for additional USD weakness.

US durable goods orders due this afternoon should extend their recent rebound but we expect any dollar reaction to be tempered by the knowledge that the Jackson Hole meeting of policymakers begins tomorrow.

Elsewhere

Oil prices have remained near-range highs overnight as Hurricane Laura continues to move towards US energy assets in the Gulf of Mexico. Without overly simplifying the scenarios, the repercussions are essentially binary; a shuttering of supply should allow for oil-exporting currencies to trade higher in the coming sessions with platforms avoiding damage likely to see the opposite.

The storm should be hitting in the next 24hrs.

Have a great day.

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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.