Pound Soars amid Decline in UK Coronavirus Cases, US Dollar Plummets on Dovish Fed Policy Statement

The Pound enjoyed strong support this week, as a result of a sustained decline in domestic coronavirus cases, as well as some positive Brexit headlines.  

At the same time, the US Dollar faced some notable headwinds, in response to a dovish policy statement from the Federal Reserve as well as an underwhelming US GDP release. 

Pound Rallies on Positive Coronavirus Statistics 

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

GBP/USD – Up two cents on the week’s opening levels 

The Pound enjoyed strong support through much of this week’s session on the back of some positive coronavirus statistics, which reported new cases fell for seven consecutive days. 

This uptrend in Sterling was reinforced by the news that the EU suspended legal action against the UK for violating the Northern Ireland protocol.  

The Bank of England (BoE) is set to conclude its latest policy meeting next week. This could see the Pound move lower if the bank indicates that it is still not prepared to begin discussions about tapering its monetary policy. 

Euro Buoyed by Vaccine Progress 

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

EUR/USD – Up two cents on the week’s opening levels 

The Euro ticked higher this week, supported by the currency’s strong negative correlation with the US Dollar, as well as the news that 70% of adults in the EU have now received at lease on dose of a coronavirus vaccine.  

The Euro then extended this upside in the latter half of the week on the back of some positive data, most notably a stronger-than-expected Eurozone GDP reading. 

Looking ahead, EUR investors may pay close attention to Germany’s latest factory orders print next week, with the Euro likely to face some headwinds if another industrial release from the Eurozone’s largest economy disappoints. 

US Dollar Undermined by Dovish Fed 

USD/GBP – Down one pence on the week’s opening levels  

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

The US Dollar faced some notable selling pressure this week in the wake of the Federal Reserve’s latest policy meeting, after Fed Chair Jerome Powell indicated the bank is still not ready to start tightening its monetary policy.  

The ‘Greenback’ was then undermined further after the latest US GDP figures printed well below expectations. 

In the spotlight for USD investors next week will be the latest US non-farm payroll print, which could extend some support to the US Dollar amidst forecasts the US economy will have added nearly one million jobs in July. 

Australian Dollar Slumps on Sydney Lockdown Extension 

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

AUD/USD – Up one cent the week’s opening levels 

The Australian Dollar trended broadly lower this week, undermined by the news that the lockdown in Sydney would be extend by another four weeks, amidst a spike in local coronavirus cases.  

Coupled with wider global coronavirus concerns this significantly dampened the appeal of the risk-sensitive ‘Aussie’. 

The Reserve Bank of Australia’s (RBA) latest rate decision will no doubt be the focus for AUD investors next week. Will another dovish policy statement from the RBA send AUD exchange rates even lower? 

Key Data  

Aug 02 GBP Manufacturing PMI (Jul)  

Aug 02 USD ISM Manufacturing PMI (Jul)  

Aug 03 AUD RBA Interest Rate Decision  

Aug 04 EUR Services PMI (Jul) 

Aug 04 GBP Services PMI (Jul)  

Aug 04 EUR Retail Sales (Jun) 

Aug 04 USD ISM Non-Manufacturing PMI (Jul)  

Aug 05 AUD Trade Balance (Jun) 

Aug 05 GBP BoE Interest Rate Decision  

Aug 06 EUR German Factory Orders (Jun) 

Aug 06 USD Non-Farm Payrolls