The pound collapsed on Friday as markets were rattled by the contents of UK Chancellor Kwasi Kwarteng’s mini-budget.
Meanwhile, trade in the pound is mixed at the start of today’s session, with GBP/EUR flat at €1.1866 and GBP/USD climbing to $1.2105. GBP/CAD and GBP/NZD are rangebound at C$1.5614 and NZ$1.9316, respectively, while GBP/AUD retreats to AU$1.7378.
Looking ahead, all eyes will be on the latest US inflation figures in the first half of this week.
The US dollar was catapulted higher at the end of last week, following the release of the latest US payroll figures.
What’s been happening?
Friday’s data revealed the US economy added another 528,000 jobs in July, smashing forecasts of a 250,000 increase and pushing unemployment down to 3.5%.
The bumper jobs report turbocharged Fed rate hike bets, reviving expectations for another 75bps hike in September.
The euro initially firmed on Friday, strengthening on the back of a surprisingly strong industrial production release from Germany.
However the single currency was forced to relinquish most of these gains in the second half of the session as a result of the euro’s negative correlation with the US dollar.
Meanwhile, the pound continued to lick its wounds on Friday, following the Bank of England’s (BoE) dovish interest rate hike on Thursday.
Turning to this week the focus is likely to be on the US consumer price index.
What’s coming up?
If US inflation continued to accelerate in July it may reinforce Fed rate hike expectations and propel the US dollar even higher.
In the meantime, the release of the EU’s latest Sentix investor confidence index later this morning could act as a headwind for the euro, if investor morale continued to deteriorate this month.
In the absence of any notable GBP data through the first half of the week it’s likely the pound could face an uphill battle amid ongoing UK political uncertainty.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)