- US Dollar strengthens ahead of potential rate cut
- Sterling hampered by ‘you know what’
The US Dollar finished last week with a skip in its step after
better than expected US economic growth stats. Annualised Gross Domestic Product (GDP) growth of 2.1% was above expectations and in stark contrast to the slowing growth elsewhere in the world. If you ask the US President, he’ll tell you it is all his doing, obviously. Whatever the reason, the USD has pushed Sterling down to $1.23 and the Euro down to $1.11. This week is likely to bring an improvement in US consumer confidence as well as a potential interest rate cut from the US Federal Reserve. Now traditionally that would weaken the US Dollar but, as the Federal Reserve is being proactive, there is a chance it will further strengthen the USD. Watch out for USD volatility on Wednesday evening.
Sterling slips against major currency pairings
Sterling has also slipped against the Euro to just below €1.11 and a lack of data today will probably leave it there. However, as we all know, Brexit is the one and only story moving the Pound right now, so utterances from Brussels, Westminster and all other parts of the United Kingdom will have more bearing on the value of the Pound than almost anything else. We are not expecting any change in the UK base rate when the Bank of England (BoE) meets on Thursday, 1st August, but they are likely to comment on the effects of the UK leaving the EU under World Trade Organization (WTO) rules, so that ought to damage the Pound. Be ready for that.
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Global economic data moving markets this week
China’s economy is slowing, so Thursday’s Caixin Manufacturing Purchasing Managers’ Index (PMI) is expected to reflect that; another worrying sign for the global economy. This week will also bring Canada’s GDP growth data and the US employment report on Friday. Both are likely to be market-moving events.
Australian Dollar should get a boost
Antipodean data this week includes Australian Consumer Price Inflation (CPI), which is expected to have risen strongly. We will also see their retail sales data. That too is expected to be strong. If that’s the case, the chances of a rate cut will take a backwards step and the AUD is likely to strengthen against GBP.
Pick up a Pound…
But, much more importantly, drop everything, get out your magnifying glass and torch and go in search of old style £1 coins down the back of the sofa and under your car seat. Apparently there are 145 million of them out there, which have not been exchanged for the new ones. You can still deposit them in banks. I searched this weekend and found a total of 3… whoopee-doo! Only 144,999,997 to go.