23rd August - Weekly FX Update

GBP/EUR: Monday 9:00 UTC 23rd August: 1.16383

The GBPEUR exchange rate faltered this week as the UK saw lower inflation and higher Covid-19 cases. Unexpectedly, the UK inflation cooled towards its 2% target, at 2.1%, however ING bank still say inflation will be close to the BoE's 4% forecast by November. This essentially reduces the chances of an earlier rate hike. The Pound has no big data releases this week, and the currency will hinge on virus cases, where over 36,000 cases were reported heading into the weekend. The headline for data this week will be German GDP, consumer confidence, and IFO business sentiment. The German election is also only a month away, and with the polls wide open, the election will certainly become a talking point over the next few weeks.

GBP/USD: Monday 9:00 UTC 23rd August: 1.36521

The Pound slumped below the 1.37 benchmark on Thursday, hitting a month-long low of 1.36067. The Dollar benefitted from the Fed's meeting minutes last week, where it was revealed policymakers may reduce pandemic stimulus before the end of 2021. It is expected however that this Friday, Jerome Powell may push back against tapering with his speech. Either way, it is unlikely to weaken the Dollar, especially not against the Pound. The UK are currently experiencing lower inflation and higher Covid-19 cases, a combination that has since drove the Pound down and will continue to do so unless there is a positive shift in Covid-19 infections.