Currency markets still shaking off bank holiday lethargy
While UK markets are slowly returning to normality after Monday’s bank holiday, Sterling remains under further selling pressure and currently languishes below 1.3100 versus the Dollar following the Fed comments. UK second quarter GDP figures provided some support, printing at 2.2% as predicted.
The Euro weakened versus Sterling by 0.2%, hitting 1.1705 by the close of play on Friday. During our Bank Holiday weekend there was little volatility in the markets, but Sterling climbed to a peak of 1.1742 against the Euro.
The Department for International Trade revealed that the UK has seen an 11% rise in inward investment on last year. Whilst this is very positive for the UK, the period accounted for was April 2015 to April 2016, raising concerns as to how the UK’s vote to leave the EU may affect future investment decisions.
On Friday, Federal Reserve Chair Janet Yellen stated at Jackson Hole that the case for higher US interest rates had strengthened as the labour market continues to overperform. Fed Vice Chair Fischer also mentioned that the consistent remarks made by Yellen has paved the way for two extra interest rate hikes in 2016. As a result of this, the Dollar rose to two-week highs as the Euro dipped to 1.1200 and the Pound fell to 1.3111.
US second quarter GDP figures also met targets at 1.1%, which boosted the Dollar versus its peers. The Dollar capped off a successful day with the US goods trade balance beating expectations at $-59.0B and the core personal consumption expenditures printed at 1.8%, 0.1% better than predicted.
Data to watch: 9:30am GBP Net Lending to Individuals MoM, GBP M4 Money Supply MoM, GBP Mortgage Approvals. 2pm US S&P/CS Composite-20 HPI YoY. 3pm US CB Consumer Confidence.