Should we keep an eye on the pound's weakening trend?
20.08.2021
- UK Retail Sales
- Germany: Producer Price Index
Yesterday, U.S. stock prices fell slightly, leading to a risk-off market characterized by lower stock prices, lower interest rates, and lower oil prices. The yield on the 10-year U.S. Treasury note fell to 1.23%, weighing on the U.S. dollar. The U.S. Philadelphia Fed Manufacturing Index for August, released yesterday, came in at 19.4, below the forecast of 23.0. This reflected a decline in demand due to the spread of the Delta variant.
In the foreign exchange market, with the U.S. dollar facing resistance at higher levels, the pound has been falling notably, with GBP/USD dropping to 1.361.Technically, GBP/USD has already lost support from its moving average on the daily chart. If it fails to reverse at the recent low of 1.357, there is a risk of a significant break below that level, making this a situation that requires careful judgment. Additionally, the pound is weakening against the euro, another European currency, and EUR/GBP has risen for two consecutive days. It is currently trading around 0.857.
Today’s key economic indicators include UK retail sales and the German producer price index at 3:00 PM, Canadian retail sales at 9:30 PM, and remarks by Kaplan, President of the Dallas Federal Reserve, at midnight. We will be closely monitoring how European currencies, including the pound, react to geopolitical risks.
Author: Keisuke Sakurai
