Sterling posted fresh yearly lows versus the US dollar yesterday, despite a steeply rising UK interest rate environment. Markets are now choosing to ignore higher yields and instead focus on rising stagflation fears.
The prospect of a fiscally stimulative Liz Truss is now also failing to rally sterling as concerns grow over the medium-term economic outlook. With no further economic data scheduled for the rest of week, sterling moves will likely be dictated by the surging US dollar and broader market themes.
The single currency took a further leg down yesterday despite better than expected PMI data. News that the Nordstream 1 gas pipeline will now not close for a 3-day maintenance period also failed to have a positive effect on the euro, as recessionary fears increase ahead of the winter period.
The relentless rise in the US dollar continued yesterday as risk currencies continue to be shunned in favour of the safety of the buck. News that the US Services PMI surprisingly contracted in August failed to make a telling dent in the currency, as markets await Fed Chair Powell’s key testimony at the Jackson Hole symposium on Friday. Given the almost unprecedented year-to-date dollar strength and extreme market positioning, the bar is set very high for further dollar appreciation following the testimony, and any hint of a pause in the current acute rate tightening cycle would see a steep sell-off in the currency.
Equals. Morning Report- 24th August 2022
Today’s Interbank Rates at 09:17 am against sterling movement.
GBP>EUR – 1.1887
GBP>USD – 1.1825
EUR>USD – 0.9950
GBP>CAD – 1.5337
GBP>AUD – 1.7087
GBP>SEK – 12.602
GBP>AED – 4.3437
GBP>HKD – 9.2790
GBP>ZAR – 20.158
GBP>CHF – 1.1387
· 12:30 USD Durable Goods Orders(Jul)
· 12:30 USD Nondefense Capital Goods Orders ex Aircraft(Jul)
· 22:45 NZD Retail Sales (QoQ)(Q2)
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