A continued rush for US dollars

GBP

Sterling suffered again at the hands of a seemingly all-conquering dollar yesterday and touched its lowest levels since January this year. It also fell against the euro but not nearly as sharply and is trading at unchanged levels this morning. It was primarily pushed lower by a general dash into the dollar, but an escalating war of words with France over post Brexit fishing rights against a backdrop of images of motorists queuing for petrol has damaged sentiment.

This morning second quarter Gross Domestic Product for the UK was released and confirmed a solid rebound in the economy, which should encourage demand for sterling today.

EUR

The euro also had a steep fall against the dollar and traded at levels not seen since November 2020. As expected, the ongoing political uncertainty in Germany isn't helping the single currency and nor is the continuing dovish rhetoric from the President of the European Central Bank, Christine Lagarde. She again played down the risks of inflation yesterday during the Sintra Forum on Central Banking.

The German Statistic Office will publish its September Unemployment Rate and Consumer Price Index later this morning. Also scheduled for release today is August's Unemployment data for the Eurozone.

USD

Currency option traders have been surprised by the speed of this week's rise in the dollar and have had to rapidly hedge their positions by selling euro's and sterling and, in doing so, have helped accelerate the moves.

With the Federal Reserve watching inflation more attentively recently, the market is likely to react after this afternoon's release of Core Personal Consumption Expenditures.

The consensus estimate is for a rise of 6.1%, the same as last month. Also on the data docket, as usual for a Thursday, is the weekly Jobless Claims total, which takes on more importance than normal ahead of next Friday's Non-Farm payroll report.

As if we haven't had enough volatility this week already, today is quarter-end when institutions need to rebalance their portfolios. This usually leads to large price swings around the 16.00 London fixing, and we would recommend that you discuss any currency requirements with your account manager this morning.