Good morning,

The British pound has continued to recover losses in the last 24 hours with Q3 coming to an end. At the time of writing, GBP was up 0.6% against the euro and 0.32% against the US dollar. The driving factor was the better than expected UK economic growth figures for the second quarter of 2021 – up 5.5% against the estimate 4.8% growth. This news gives the pound some support and prevents GBP-USD going below 1.34. However, GDP growth in the UK is still 3.3% smaller than it was in the final quarter of 2019, before COVID-19 and fears of high inflation had not gone away.

The furlough scheme comes to an end today with nearly one million workers expected to be on the scheme by the end of September. Total cost is expecting to come to nearly £70bn which managed to keep unemployment figures under half the pre-pandemic expectation. It will be interesting to see how the unemployment figures track in the build up to Christmas and into 2022, no doubt it will put extra pressure on the Bank of England’s interest rate decision next year.

EUR-USD has broken through the 1.16 mark getting down to a low of 1.15642 in the last 24 hours. The key driving factor is the shift in the Fed’s stance on its ultra-easy monetary policy programme. Quantitative easing expected to be finished by mid-2022 with a rate hike to follow after. EUR-USD could continue to fall throughout the next few years with the ECB looking like it will keep interest rates below zero.

Today we have Euro zone inflation out first thing followed by US manufacturing figures at lunch time which will give us a good indicator on how the US is performing domestically.

Have a great weekend.

Josh Saunders, Senior Relationship Manager.

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