August Currency Market Update
Time waits for no one in the currency markets. Only two weeks ago we reported that the pound had reached its best price against the euro since the pandemic struck last year and it became one the hardest hit currencies as result of a big global turn down, dropping to 1.05 at its lowest point in March 2020. Since then its been a long road to recovery for pound sterling.
So far during 2021 the pound has been one of the markets best performing currencies seeing differing levels of gains against all of other major currencies. In particular against the euro the pound reached 1.1831 in early August. However, since reaching the highs, a combination of some patchy economic UK data suggests an uneven recovery for the UK helped push sentiment for sterling down. Added also the events unfolding in Kabul across Afghanistan, investors turned tail from risker currencies like pound sterling and sought the safe haven of the US dollar.
With this sterling suffered significant losses against the euro and US dollar, ending last week its worst performing week against the two currencies for 2 months, lows of 1.1630 GBPEUR and 1.37602 GBPUSD seen by the end of Fridays trading session.
Sterling has kicked off this week trading strong, seeing highs on Monday of 1.1693 GBPEUR and 1.3731 GBPUSD, as risk sentiment across the markets recovered somewhat after last week’s jitters.
Despite the encouraging start to the week for sterling, concerns remain with the growing number of Delta Variants cases being confirmed on an almost daily basis could derail the recovery and potential further growth in the UK. Data out on Monday morning showed Britain’s post-lockdown economic rebound slowed sharply in August, as companies struggles with unprecedented shortages of materials and staff. This latest PMI reading from IHS Markit showed a greater-than-expected slow down for the 3rd month in a row, the markets had expected a number of 59.0 so an actual reading of 55.5 being confirmed disappointed markets and will do little to support sterling’s endeavours for further support and upwards gains against other currencies.
Economic data releases for the remainder of the week are thin on the ground, which could prove to be a boast for the pound after a difficult period, and potentially help the currency regain more of last week’s losses and get close the highs seen against the euro earlier this month and draw closer to the appealing level of 1.40 against the US dollar. However looking at the other side with such little data out, attention will remain fixed on how developments unravel in Afghanistan, where we all hope a peaceful solution can be found asap, but with US President Joe Biden remaining determined to completely remove all remaining troops and workers by the end the of the month and the UK expected to follow, further trouble could be soon ahead if the Taliban causes further unrest, this would likely again highlight the pound as a ‘risk on’ currency seeing investors moving away and to the safe haven if the US dollar, we would then see the pound fall further in value against its counterparts like the euro and US Dollar.
The market will continue to change and move throughout the day and on a daily basis, so if you would like to find out the latest developments and rates update please feel free to get in touch with one of our experts today for free update and quote on our live exchange rates.