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Breathing room

Breathing room

The Pound experienced losses against the US Dollar and Euro last week but managed to achieve some highs against other majors elsewhere as commodity prices fell. Last week, UK inflation levels edged lower, which should give the Bank of England some breathing room on the topic of monetary policy in the immediate future. In the week ahead, UK manufacturing and services stats have already been released—manufacturing beat expectations, but services came in below forecasts—but there's little data of note out in the remainder of the week, leaving Sterling sensitive to geopolitical developments.

Gaining momentum

The Pound to Euro exchange rate experienced its worst-performing week since April 2021, closing 0.85% lower last week. The Eurozone has been registering good recovery levels out of the pandemic, despite having a slower start than some other nations. Some data from Markit detailing manufacturing, services, and construction levels, have reached their average highest levels for around 21 years, despite the Delta variant causing disruptions. In the week ahead, there will be some highly influential German stats due out, as well as the European Central Bank's monetary policy meeting minutes.

Watching for Jackson Hole 

The Pound experienced its worst-performing week since June 2021 against the US Dollar, closing 1.59% lower at the close of the week after hitting four-week lows. The US Dollar surged against other currency majors, climbing by around 1.0% and hitting nine-month highs as risk sentiment ebbed. One of the most significant events for how the US Dollar trades this week could be Federal Reserve Chairman Jerome Powell's speech at the annual Jackson Hole Symposium on Friday. Markets will be keen for any indication on how the Fed might look to manage its monetary policy moving forwards. US growth data will also be out, as well as manufacturing and services stats.

Standing firm

The Pound to Australian Dollar exchange rate hit its highest level since August 2020, closing the week around 1.57% higher than it began. Against the New Zealand Dollar, the British currency traded similarly—also reaching the most substantial level since August 2020 and closing around 1.52% higher.
Last week, the Reserve Bank of New Zealand opted to keep interest rates on hold at 0.25%, despite many forecasting that the central bank could hike to 0.50%. The Unemployment Rate also fell, and Employment Change data beat expectations. The week ahead is relatively quiet regarding economic data, with only New Zealand Trade Balance and Australian Retail Sales stats worth noting.

Election calls

The Pound to Canadian Dollar exchange rate reached its highest level since March 2021 last week, closing 0.77% stronger as the Loonie took a hit on falling commodity prices. However, last week revealed inflation data punched above forecasts in July—its fastest growth since May 2011. The move causes a headache for Prime Minister Justin Trudeau as competitors suggest there's a cost-of-living crisis under his rule—just after he's called an election two years ahead of schedule in the hopes of winning a majority following his successful handling of Covid. The election is due to take place on 20th September and could create some volatility in how the Canadian Dollar trades. In the week ahead, a smattering of low-tier Canadian data will be released, as well as some medium-tier wage data.