Throughout July and August, the pound managed to escape its tight trading range against the euro and topped at 1.18. This led many to believe that the ‘speedy economic recovery’ narrative was gathering more steam.
Recent data however suggests that this may have been false hope. The growth rebound seems to have slowed over recent months, with data such as debit and credit card spending coming in weaker than expected. This is surprising, and goes against what one may expect from a ‘post-Covid’ summer reopening.
If we zoom out to the medium- to long term, the pound is still supported by its central bank policy. If inflation keeps running hot and the Bank of England sticks to its path of a 2022 interest rate hike, the outlook need not be so grim. Especially when we note that the European Central bank is no where near even contemplating a rate rise.
In other news, EURUSD has seen a remarkable uplift by renewing their three-week top above 1.18. Here we can point squarely to the dollar as a downside driver, with Fed Chair Jerome Powell dampening the mood by saying it is in no rush to taper its bond buying scheme.
Have a great day.
Thomas De Caluwé, Relationship Manager.
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