FC Exchange August overview

Britain’s pound ended last month somewhat down against the US dollar which has largely been ascribed to a lack of positive macroeconomic data emanating from the UK. There is now a growing number of pundits who believe this could spill over into 2015. This will allay concerns of an interest rate hike, however, as the UK continues to stutter in its recovery, but the downside of course is that GBP will most likely suffer against USD for some time to come. Overall, though, conditions for the pound are by no means dire and it’s likely that GBP will still outpace the growth of its G7 partners, but some kind of clarity over the interest rate situation is needed – a ball that lies in BoE Governor Mark Carney’s court. Versus the euro, GBP has fared better with poor data and inflationary concerns hampering the single currency.

The Eurozone seems ripe for deflation, with policy overlords meeting in Frankfurt this week to discuss the best way forward in terms of ways to shore things up. A worsening CPI has meant broad based asset purchasing Inflation was at its worst level (0.3%) last month since 2009. This all means that EUR will be under continued pressure this month, and this is, of course, coupled with issues in Ukraine with what appears to be a Russian invasion. This morning we saw German GDP come out in line with expectations yet still below that of previous readings.

In the US, August saw USD strengthen against both the pound and euro following a month of relatively good data. Following a poor start to the year with lacking Q1 data, the economy came back fighting in Q2 with a growth rate of 4.2%. Employment figures have also been on the up with NFP’s exceeding 200,000 a month since February.