Pound Sterling

Pound Sinks as Mixed GDP Release, US Dollar Fluctuates as US Inflation ‘Peaks’

The Pound fell back this week, with the currency suffering a sharp drop off following the publication of the UK’s latest GDP estimate as it failed to impress investors. 

At the same time, the US Dollar traded in a wide range this week, after being rocked in mid-week trade by the latest US consumer price index. 

Pound Tumbles as UK GDP Fails to Impress 

GBP/EUR – Up one cent on the week’s opening levels 

GBP/USD – Unchanged on the week’s opening levels 

The Pound traded in a fairly narrow range through the first part of this week, as a lack of notable UK economic data left the currency without any strong directional bias.  

Despite reporting a strong expansion of growth in the second quarter, the UK’s latest GDP release failed to offer much support to Sterling, leaving the currency to plunge through the second half of the week as GBP investors began to revise their Bank of England (BoE) tapering expectations. 

Looking ahead, there will be plenty of data for GBP investors to sink their teeth into next week, with robust employment and inflation releases potentially propelling the Pound higher. 

Euro Undermined by Deteriorating Economic Sentiment 

EUR/GBP – Up one pence on the week’s opening levels 

EUR/USD – Down one cent on the week’s opening levels 

The Euro stumbled through the first half of this week following disappointing ZEW surveys from Germany, which revealed economic sentiment in the Eurozone’s largest economy slump to a nine-month low in August.  

The Euro was able to claw back some of these losses following a weakening of the US Dollar, but struggled to find any meaningful gains in the wake of a lacklustre Eurozone industrial production reading. 

Turning to next week, the release of the Eurozone’s latest GDP estimate will likely be the primary focus for EUR investors, with confirmation of a strong rebound in second quarter growth potentially offering some support to the Euro. 

US Dollar Rocked by US Inflation Print 

USD/GBP – Unchanged on the week’s opening levels  

USD/EUR – Unchanged on the week’s opening levels  

The US Dollar initially traded higher this week, as a cautious market mood saw investors favour the safe-haven currency.  

USD exchange rates subsequently weakened as the latest US CPI release prompted speculation that US inflation had peaked, before a further deterioration in market sentiment, coupled with upbeat US data releases revived demand for the ‘Greenback’.  

The spotlight for USD investors next week will likely be on the latest US retail sales figures, in which an expected slowing of sales growth last month could undermine US Dollar demand. 

Australian Dollar Fluctuates amidst Mixed Market Mood 

AUD/GBP – Up one pence the week’s opening levels 

AUD/USD – Unchanged on the week’s opening levels 

The Australian Dollar opened this week’s session on the defensive, as a deterioration in domestic business and consumer sentiment took their toll on the currency.  

The ‘Aussie’ sought to mount a recovery in the second half of the week as a softening of USD exchange rates helped to revive market risk appetite, but this proved short lived as domestic coronavirus woes curtailed AUD demand. 

In the spotlight for AUD investors next week will be the publication of Australia’s latest jobs report. Will a rise in unemployment last month unravel some of the ‘Aussie’s gains? 

Key Data  

Aug 17 AUD RBA Minutes 

Aug 17 GBP Unemployment Rate (Jun) 

Aug 17 EUR GDP (Q2) 

Aug 17 USD Retail Sales (Jul) 

Aug 17 USD Industrial Production (Jul) 

Aug 18 GBP Inflation Rate (Jul) 

Aug 18 EUR Inflation Rate (Jul)  

Aug 19 AUD Unemployment Rate (Jul) 

Aug 19 USD Initial Jobless Claims (14/Aug) 

Aug 20 GBP Retail Sales (Jul)