GBP

The pound gained against the euro for the second day running yesterday, almost hitting levels not seen since early April. All fingers point to falling Covid numbers as the driving factor.

In other good news for sterling, the International Monetary Fund (IMF) released its global forecast yesterday and awarded its biggest upgrade to Britain, lifting its 2021 growth by 1.7% to 7.0%. After the news broke, both GBP/USD and GBP/EUR spiked.

In contrast, the eurozone’s upgrade was a modest 0.2%.

USD

All eyes will be on today’s Federal Reserve meeting where investors will continue their search for monetary policy clues. The debate of whether the Fed will be the first major central bank to tighten monetary policy and taper asset purchases is expected to continue along with a ‘wait and see’ approach.

It was light data day in the US yesterday with just July’s consumer confidence released. Confidence is currently at a 17-month high, suggesting economic growth for this year’s third quarter is starting strong.

The IMF global forecast contained good news for the dollar too. It now expects growth at 7.0% in 2021 and 4.9% in 2022 – up 0.6% and 1.4% respectively, from forecasts in April. The projections assume Congress will approve President Biden’s $4 trillion proposed infrastructure, education and family support spending.

Worldwide

The IMF maintained its 6% global growth forecast for 2021 but upgraded its outlook for most wealthy economies. Developing nations, however, saw their forecasts cut as they struggle to cope with the pandemic. The IMF put this down to a lack of access to vaccines and fiscal support. Almost 40% of the population in advanced economies have now been fully vaccinated, compared to only 11% of developing nations.

India saw the biggest cut, dropping from 3% to 9.5% for 2021.

Key announcements

1:30pm – CAD- Consumer Price Index
3:30pm – USD – US Crude oil inventories
7:00pm – USD – Federal Open Market Committee rate decision and press conference