Sterling hits eight-month high against the USD
Sterling reached an eight-month high against the dollar as the US currency fell across the board in response to Federal Reserve Chairman, Jerome Powell’s speech at the Jackson Hole symposium.
Speaking at the same event on Friday, Bank of England Governor Andrew Bailey said the British central bank had more ammunition to support the economy after its coronavirus lockdown downturn, and there was evidence that the central banks current aggressive stimulus into the UK’s economy is effective.
Currency markets still seem to be reluctant to take strong views on the pound, with most investors remaining on the sidelines in typically quiet August trading.
Renewed weakness in the pound is still a possibility, as a mix of Brexit uncertainty, coronavirus fears and poor predicted economic data could push sterling lower over the coming months.
Despite this, British business confidence has ticked up, but still remains far below usual levels as the economy struggles to cope with social distancing measures and employers preparing to cut jobs, a survey showed on Friday.
The dollar hit a more than two-year low and a fourth straight month of losses on Monday in the wake of the US Federal Reserve’s policy change of stance on inflation. Currency markets are still reacting to a speech last Thursday in which Fed Chair Jerome Powell outlined a policy change that is perceived as moving inflation slightly higher and interest rates staying lower for longer.
Powell’s points continued a downward trend in the dollar. The Fed’s stimulus to offset the economic effects of the coronavirus pandemic has driven risk assets higher and hurt the safe-haven dollar.
09.00 – EU – CPI expected at 0.9% from a previous reading of 1.2%
14.00 – US – ISM manufacturing PMI expected at 54.5 from a previous reading of 54.2
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