Weekly Market Report: 25th – 27th Aug 2021

Wednesday 25th August – There was very little movement for the Pound on Wednesday as ongoing supply chain issues left investors concerned. The reports of increased disruption left traders unsettled as this is likely to have a significant impact on the economic recovery in the second half of the year. As a result, the Pound finished the day at 1.1692 against the Euro and 1.3762 against the US Dollar according to the Foreign Exchange Market.

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During trading yesterday, the Euro nudged lower following the latest German IFO business climate index which came in lower than expected which caused concerns about the largest economy in the EU. Comments from the European Central Bank suggested that it is too early to discuss the finalisation of the pandemic stimulus measures.

The US Dollar Edged higher against many of its peers as the recent US durable goods orders came in above expectations. Goods order growth dropped by 0.1% which meant that it beat forecasts while a drop in market sentiment also helped to boost the appeal of the Greenback.

Thursday 26th August

The Pound was on the defensive on Thursday as further concerns around the economy took hold of investors. This followed a survey from the Confederation of British Industry (CBI). It indicated significant concerns around labour shortages that are causing problems for businesses. Furthermore, the supply chain issues are also adding to the pressure, indicating that this could slow down the economic recovery in the UK. At the end of trading, the currency closed at 1.1655 against the Euro and 1.3702 against the US Dollar according to the Foreign Exchange Market.

The Euro nudged lower yesterday as the strong negative correlation with the US Dollar weighed heavily on the single currency. Furthermore, the appeal of the Euro was also limited following the publication of the European Central Bank’s July policy meeting which saw it take a dovish stance. The relationship with the US Dollar could dictate the direction of the Euro today.

It was another strong day for the US Dollar as it reacted to comments from James Bullard, the Federal Reserve policymaker. He suggested that sceptical inflation will moderate in 2022 and called for the Fed to end tapering its bond purchases by the Q1 of 2022. However, the gains made were limited as US data indicated that US GDP came in lower than expected.

Friday 27th August

At the end of Friday’s session, the Pound struggled to gain any traction.

This was down to the increasing coronavirus statistics and the issues around the supply chain in the UK, both of which placed pressure on the currency. This saw the Pound finish at 1.1668 against the Euro and 1.3765 against the US Dollar. Looking at the rest of this week, a lack of data is likely to mean that the Pound is not going to build any momentum.

As the session closed last week, the Euro finished on a high as the negative correlation with the US Dollar pushed it higher. German inflation continued to improve this month which helped to give the single currency even more strength. Investors will be keeping an eye on the consumer price index as this could force the European Central Bank to rethink its dovish stance.

Following Jerome Powell’s speech on Friday, the US Dollar shrunk. Powell said that the Fed might begin tapering this year although no indication of when was provided. This left investors disappointed although this week, they are likely to be focused on the latest ISM manufacturing PMI.



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