An eventful end to the week has resulted in further market volatility and a dip in USD as markets digest news:
GBP – The Bank of England’s Governor, Andrew Bailey, is due to speak virtually at the Jackson Hole Symposium today at around 14:00 BST. After the boost in UK retail figures for July was confirmed last week, traders are not expecting Bailey to hint at negative interest rates, which have always been spoken about as being in his “toolbox”. As with Fed Chair Jerome Powell’s speech yesterday, the message will likely see the rhetoric of interest rates being kept low for a sustained period of time, to support the UK economy.
USD –Yesterday saw the US GDP release come in better than expected, giving the dollar a moment of breathing space after the recent poor run it has endured. However, when Powell delivered his speech, the trend was soon reversed and snapped back, wiping all of the gains, moving GBPUSD up to 1.3285. The speech focused on low interest rates for a sustained period of time, in an attempt to support the US economy by keeping consumers spending their cash. He also went on to say the Fed will adjust their inflation targets to move to an average basis, which could see inflation move past the targeted 2%. Even if this happens, interest rates will still remain low. After a quick recovery, GBPUSD has moved back towards the higher bracket of 1.32 through Asian trading, with EURUSD testing 1.19.
EUR – At 10:00 BST the Eurozone will release their consumer and business confidence figures for August. Now the dust has settled on the €750bn ‘corona-fund’ from the end of July, investors are keen to see if the confidence has been reciprocated across the common market; with a rising number of Covid cases creeping back up in certain countries, a second wave fear could dampen the release causing further economic downturn.
JPY – This morning, Japan’s longest serving Prime Minister, Shinzo Abe, announced he will leave his position due to ill health. The safe haven currency quickly sold off, as investors scrambled to make sense of the news. In turn, JPY touched near monthly lows before making ground back.
Have a great weekend.
Author: Jack Nicholls, Relationship Manager
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