Gentium FX | Daily Report - 22nd August 2022 -The USD Continues To Strengthen

GBP: The Pound weakened against both the Euro and the Dollar on Friday but has started to make up ground against the common currency this morning. This week is fairly quiet in terms of UK economic data with the only figures of note being tomorrow’s UK flash manufacturing and services PMI’s. The market is concerned with how households will cope with the high level of inflation and rising energy costs in the UK. Strike action over pay at Felixstowe port is expected to last until 29th August – with Felixstowe accounting for around 48% of container trade, this could keep the Pound from making significant gains.?

EUR: Gazprom have announced that the Nord Stream 1 pipeline will be closed for maintenance on a compressor between 31 August – 2 September. The impact that the gas supply issue is having on German industrial production means that it is likely that Europe’s largest economy will fall into a recession. The German Bundesbank monthly report released today will be closely watched by investors for an indication of how the economy is coping. The market is now pricing in a 54 basis point hike by the ECB in September – any hawkish comments from ECB members could raise the prospect of a more aggressive hike.

USD: The Dollar strengthened across the board on Friday due to its safe-haven status as the gas supply situation in Europe has worsened. The Jackson Hole Symposium will be taking place on Thursday and Friday this week. Federal Reserve Chairman Powell will be speaking on Friday – at the moment there are rumours of interest rate cuts in 2023 by the central bank to avoid a squeeze in liquidity. However, comments from any FOMC members about the future path of interest rates in the US will be closely monitored and could create further volatility.

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