Sterling was on the front foot yesterday, exhibiting “substantial resilience in dismissing bad news”. Despite rising COVID-19 cases “casting a dark cloud over growth prospects” and a disappointing PMI release on Monday, Sterling was able to notch gains against both the Euro and Dollar. The UK recorded a further 31,914 COVID-19 cases on Monday compared to the 28,438 new cases reported last Monday. Markit Composite PMI and Services PMI both missed expectations yesterday morning. Flash Composite was forecasted at 58.4 but came in way below that at 55.3. Services was expected at 59 but was released 3.5 under estimate at 55.5. Manufacturing proved to be the only bright spot of the report, coming in 0.6 over forecast at 60.1. It is worth noting that while some of these figures are ‘under forecast’, any reading above 50 represents expansion, and “investors seem to be content with “normal” growth and not only a speedy post-pandemic recovery”.
Assisting Cable’s upside was also a dwindling Dollar. The main hindrance to the Greenback at present is the rising number of Delta variant cases sweeping through the United States. The resurgence of COVID-19 cases in the US yesterday forced Federal Reserve officials to abruptly cancel their “premier in-person conference”, the Jackson Hole Symposium. Also holding the Dollar back, is the uncertainty surrounding the Fed on whether they will begin tapering bond-buying scheme. From the minutes of the July 27-28 policy meeting, it was clear most policymakers are keen to begin reducing the Fed’s asset-purchase program by the end of 2021.
As the Dollar softened on Monday, Sterling was able to capitalize. Cable started the session at 1.3654 and gained enough momentum to surpass the 1.37 handle. GBPUSD finally closed Monday at 1.3718.
GBPEUR was able to make some subtle gains yesterday. The pair opened the day at 1.1651 and closed the session at 1.1685.
Similarly, EURUSD also made minor gains on Monday. The pair started at 1.1718 and closed at 1.1739.