GBP had a strong day and rallied 0.8% against USD and 0.4% against EUR, closing at 1.3732 and 1.1681 respectively.
Covid figures in the US soar again with more than 150,000 cases reported a day and a 40% increase in hospitalisation admissions over the past two weeks. Whilst most cases are in under vaccinated areas the relentless spreading across the country is a growing concern.
As a result, and contrary to recent speculation, the Fed is expected to refrain from withdrawing its bond buying scheme next month. Robert Kaplan, the Dallas Fed president – who previously urged withdrawing stimulus – mentioned that the spread of the Delta variant may lead him to change his views. Extending the bond buying drive weakens the greenback and implies the bank would only raise interest rates after.
GBP gains were capped though as the country’s economic rebound slowed in August with the Services Flash PMI reading 55.5 against the market’s expectation of 59.0 and July’s reading of 59.6.
There was some better news from the Manufacturing PMI which read 60.1 vs expectations for 59.5, however this better than expected outcome for the Manufacturing sector is outweighed by the Services miss given the heavy weighting of services in the UK economy.
All eyes will turn to the Jackson Hole symposium this Friday to see Fed Chair Powell’s critical speech for any signals of tapering its asset purchases.
Have a great day.
Jack Nicholls, Senior Relationship Manager.
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