16th August - Weekly FX Update

GBP/EUR: Monday 9:00 UTC 16th August: 1.17603

The GBPEUR exchange rate saw a rally to new highs above 1.18 last week, however, it pulled back heading in to the weekend with higher Covid-19 cases in the UK. Moreover, British GDP for Q2 fell short of the Bank of England's expectations of 5%, still over 4% below pre-virus growth. In a busy week for the GBPEUR rate, Tuesday will see the latest employment figures for the UK. Analysts are expecting an improvement from the 25k added last month. Inflation rate will also be released Wednesday, and a keen eye will be looking at how the economy has fared since last month's 2.5%. Eurozone GDP and inflation will also be released this week. Inflation is currently being helped by countries such as Spain and Italy, who are experiencing lower numbers. The ECB may find themselves in a tricky situation if they look to cool the higher inflation in Germany, which will likely see growth slow in other nations.

GBP/USD: Monday 9:00 UTC 16th August: 1.38614

The Pound stumbled against the Dollar last Thursday. Despite UK economic growth jumping up to 4.8% in the second quarter, it fell short of the BoE's forecast of 5%, which was largely down to the spread of the Delta variant which forced millions to self-isolate after getting 'pinged' by the NHS app. This figure is also 4.4% below pre-virus levels, which suggests that the UK may be lagging behind other large economies. Compared to the US, by the end of Q2 it had almost completely reversed its lost ground. As Covid-19 cases move higher in the UK, the Pound is not positioned very positively. Markets are however worried about a plummet in US consumer confidence, with sentiment dropping as doubts have been cast over the US recovery. Fed Chair, Jerome Powell, will speak Tuesday.