A mixed start for the Pound

A mixed start to the new month for the Pound.

Against the Euro, its trading at the bottom end of the 30-day trading range having lost just under 2-cents since 10 August.

Better news for the Pound against the US Dollar. Having hit its lowest level on 21 August since 19 January, its now picked up just under 2 cents to stand at the midpoint of the last 30 day trading range.

Recent UK news includes:-

- Thanks to the UK’s large economy, low unemployment rate and ease to start and run a business here, the UK?has been named as the best country in Europe to start a business according to a recent study which?looked at national performance indicators for 28 European countries.

- Commercial property information provider CoStar Group reported that the?UK high street has lost 83% of its main department stores in the five years following the collapse of the BHS group with more than two-thirds of these shops remain unoccupied as consumer continue to switch to online shopping options.?

- The latest?UK business confidence survey showed UK business confidence increased by 6 points to 36% in August, the highest level since 2017.

- UK mortgage approvals declined over the last month, the first full month since the introduction of the stamp duty holiday taper.

- The latest data from the Office for National Statistics (ONS) shows house prices rose by 13.2% in the period June 2020 to June 2021 to a record average high of ￡266,000.

- The latest IHS Markit / CIPS purchasing managers’ index slid to 60.4 in July, dropping from June’s 63.9 reading and May’s record high of 65.6.?Despite the pull back over the last month, the latest data confirms that the UK manufacturing industry has expanded for 14 successive months.

All in all, a positive enough batch of economic data so why has the Pound slipped against the single currency?

Perhaps its the rise in the Covid infection rate (now around 30,000 daily cases) ahead of the start of the new school year in England and Wales next week. Perhaps its the ongoing impasse in the UK / EU Brexit negotiations over the NI protocol; perhaps its market concern over the coming inflationary spike; perhaps its the supply chain issues with the lorry driver shortage amidst the recent 'pingdemic'.

Most probably, its a combination of factors more to do with market sentiment turning negative.?

So why then the increase in the value of the Pound against the US Dollar?

I think the picture is clearer here. Its almost certainly more to do with Dollar weakness than Pound strength.

Regardless of the political rights and wrongs of the withdrawal from Afghanistan, the following has certainly caught my and no doubt the market's attention:-

- The US left behind upwards of $85 billion worth of US military hardware.

- This makes the now Taliban run Afghanistan the 5th best equipped army in the world.

- This month sees the 20th anniversary of 9 / 11.

Scary stuff.

Much less reported is the fact that?Afghanistan’s lithium reserves are believed to be the largest in the world alongside huge deposits of?iron, copper, gold, cobalt and other rare-earth materials. As long ago as 2010, a report by US military experts and geologists estimated that Afghanistan was sitting on nearly $1 trillion and all now seemingly lost to the West with China already moving in to work alongside their new chums.

In my 35 years working in the financial markets, I have been reading reports of the upcoming demise of the mighty US Dollar as the world's reserve currency.?

Its never looked likely given the size of the US economy, easily the biggest in the world, so big in fact that if California, Florida and Texas were independent nations, all three would be in the top 12 nations by GDP size and the fact that all commodities are priced in USD.

For the first time in my working life, I am not so sure the USD will still be King in years to come.

As the great Thomas Sowell once said " It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong."

At Cosmos Currency Exchange,?we provide each and every client with a bespoke tailor-made service to their own individual currency needs?wholly based on our holistic approach.

We value our long-term relationships, not simply the individual transaction.

Please call us on 0044 (0)1202 804733 or email us at?[email protected]?to discuss your individual currency requirement.??

We are ready to assist you.