The pound seemed to pump the breaks a bit yesterday as we watched it slow down against the dollar and euro. Some of this pullback was down to the British Chamber of Commerce and their comments that recent figures have shown a slowdown in some sectors of the economy and that a sustained period of low interest rates would offer companies security and stability. Any rate rises, they said, should also be predictable and moderated given the drop off in the manufacturing and service sectors in Q2. If there is a rate hike, as many think there will be, before the end of the year then there will be a sharp dip for GBP as a pending rate hike is thought by many to already be factored into the market.
EUR had a more positive day yesterday despite news that German industrial output had fallen somewhat – fuelling fears that Q2 is going to be much weaker for the single currency. There is now also the expectation that the ECB is going to have to loosen its monetary policy in coming months to further help fix the situation. What was in the euro’s favour, however, was better-than-expected Sentix Confidence data which showed that sentiment for the Eurozone as a whole with investor confidence up this month to 10.1 from June’s 8.5.
USD made a few small gains against it counterparts yesterday although there seems to be some lag to its strength following the Independence Day holiday. Last week we did also see some positive job’s data with over 200K jobs added to the economy last month. Some analysts have noted that the dollar’s softer performance may be down to the slip in US Treasury yields we saw recently. While we have seen some recent dips for the dollar, many feel that the Fed will still continue with its asset purchasing tapering while having an eye to raise interest rates next year.
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