The British Pound has continued its recovery this week with a continuation of daily drops in Covid cases against the figures released 7 days earlier. Earlier this week, The UK saw a 38% drop for week on week cases, bringing some optimism that the third wave ending may well be in sight. With cases having worryingly surged throughout June and July, economically The UK saw the effects with consumer spending down and business confidence down due to a higher amount of people isolating at home in what was dubbed ‘The Pingdemic’. Should this improvement in cases and deaths improve over a longer term period then The Pound will find itself better supported as The Bank of England will be looking at the possibilities of a better performing economy moving forward.
Up next for The UK is in fact July’s rate decision next Thursday. Over the past few meetings, there has been a reluctance to commit to a rate change either way with some cautiousness around the economic recovery. With cases surging over the past 4 weeks The Bank of England have brought to light how UK banks are now prepared for negative rates. However, it is expected that cases as they have over the past 7 days will start to decrease as more and more people get vaccinated for the first and/or second time which should allow for a more positive outlook for economic recovery. Any potential winter lockdown and immediate consequences of this would almost certainly rule out a rate hike in 2022.
Wednesday evenings Fed meeting has only further dampened The US Dollar against the major currencies as Fed Reserve Chairman Jerome Powell insisted that Interest Rates are not imminent. These comments came after the Fed meeting where Powell was aggressive with his view that the job market still had some ground to cover before attentions can turn to Monetary Policy. Economically, as with every Thursday brings the release of US jobless and continuing claims which will no doubt provide The Fed with a better picture of the jobs market. More importantly this is followed by the data on Friday showing the change in wages and consumer spending. Any improvement in the data releases will provide The USD some much needed respite.