Many economists concur that the Great British Pound “could see further gains against the Euro as investors buy into an economic recovery story that means the UK is set to grow faster than its Eurozone rivals in 2021”. As GBPEUR attempts to surpass its highest levels since April, it would appear the dramatic drop in UK infections is the main catalyst for this move. Especially as major Eurozone economies and the United States are seeing a rise in the COVID-19 Delta variant. Due to the nature of the latest COVID-19 developments, some argue that “the development could allow the Bank of England to raise interest rates ahead of the U.S. Federal Reserve and European Central Bank, creating a divergence in central bank policy that is favourable of appreciation in Sterling”. At the time of writing, Sterling is currently registered as the week’s top performing G10 currency – a trend that could continue for some time as other states fall victim to rising COVID-19 cases.
As for yesterday’s Federal Reserve meeting, the US Central Bank (as expected) left rates unchanged at a range of 0% and 2.5% and kept its bond buying the programme that same. When asked about monetary policy Chairman Jerome Powell said that the economy is a good deal away from making “substantial further progress” toward the Fed’s dual mandates of stable prices and maximum employment. On the US labour market, Powell went as far to say that the US “have some ground to cover on the labour market… we’re some way away from having had substantial further progress toward to the maximum employment goal.
An underwhelming Fed meeting yesterday did little to inspire the Dollar, allowing a stronger Sterling to stabilize on the day. GBPUSD started the day at 1.3873 but closed just below that mark at 1.3868.
GBPEUR in contrast was able to gain some upside. The pair started the day at 1.1739 and closed at 1.1753.
Similarly to Cable, EURUSD made a loss on Wednesday. The pair opened at 1.1818 and closed at 1.1799.