USD gaining on haven buying

There is an undeniable concern in the financial markets over the potential for a delay in the global economic recovery due to the seemingly unshakable delta variant of Covid-19. That is manifesting itself in a flow of investor funds into the safer assets, like gold and the USD. Those safe haven buyers are hoping for a double bubble of further Dollar strength through market nervousness and the USD strength that comes from an early US interest rate hike.

Euro tracks USD strength

Whilst the Euro, being the 2nd most liquid currency on the planet, is tracking the USD, it isn’t in lockstep. The EURUSD rate is the lowest it has been since November 2020, so the gains the USD has made elsewhere are also reflected here. GBPUSD has also swung in the Dollar’s favour. This morning’s $1.3615 is on par with the dip we saw at the end of July. Any lower and it will be reaching depths not seen since January.

UK retail sales in surprise July setback

That dip in the Pound’s value will have been enhanced by this morning’s very disappointing UK retail sales data. A contraction in core retail sales of 2.4% in the month of July was much larger than the forecast of 0.3% growth and it brought the annualised rate of core retail sales growth down to 1.8%; a third of the market expectation. These numbers appear to be at odds with anything anecdotal, so we may see a spring back next month but, for now, the Pound is under the cosh.

The emerging Euro strength has knocked the GBPEURs well. GBPEUR is down to €1.1660 this morning, the lowest it has been since 23rd July. On a medium-term view, this pair is still in an upward trend unless we close the week below €1.1575. It isn’t too outrageous to suggest that could happen but there is little or no EU data today. So, it would take further USD strength to drag the Euro through that level.

All this USD buying has left the traditionally riskier currencies like the Australian, New Zealand and Canadian Dollars on the back foot. No offence to Aussie, Kiwi or Canuck readers; this is just a market perception. The additional worries over the increasing lockdowns in Australasia are also damaging the AUD and NZD. So, even though the Pound is suffering at the hands of the USD, it is still pushing AUD 1.91, NZD 1.9950 and CAD 1.7550; a level not seen since April. I know a lot of our clients are taking advantage of these very attractive levels. Beware though that this afternoon’s Canadian retail sales data is forecast to be pretty good, so these could be the sort term highs in the GBPCAD rate.

And finally, almost all of the Halo Team managed to get together for a companywide catch-up yesterday evening. I am sure many of you are also having the same ‘so good to actually see you’ moments after nearly 18 months of remote video calls but, can I just say, even though it is now becoming a cliché, it was so good to actually see everyone and really great to see some of our new members of staff meeting each other for the 1st time. I feel utterly reinvigorated this morning.

Have a great weekend everyone

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