GBP

The pound finished the week 0.3% higher against the dollar compared to the opening rate on Monday morning. Though this is a small move overall we saw 1% of total volatility in cable, most of this coming off the back of the UK officially entering a technical recession after posting negative growth of 20.4% during the second quarter. Against the euro we saw similar volatility of 0.9% and the pound finishing the week 0.2% down.

Brexit will be back into focus this week with the next round of UK:EU trade talks. A range of optimistic tweets from both sides of the channel shows that there could be some movement on difficult issues with some analysts predicting a deal struck by October. As always, any surprise headlines off the back of these talks will create volatility in the markets. Data wise will see the release of July CPI, retail sales and August PMIs. Markets are predicting the data should show economic recovery, but many consider this just a bounce back and not a true recovery as the outlook starts to deteriorate into September with high job losses expected.

EUR

The euro managed to claw back some of the losses it sustained at the beginning of the week and finished 0.2% up against the dollar, rising for the eighth straight week. Thursday saw German CPI decline by 0.5% and Friday Eurozone Q2 GDP confirmed at -12.1%. Though both important, neither data release impacted the market significantly.

This week will see Fridays release of flash Eurozone PMI data which will be key, as it will be looked at for further evidence of continuing economic recovery. But apart from this the euro is in for another quiet data week and instead the markets will be looking at how countries continue to manage COVID-19.

USD

The dollar index fell again for the eighth straight week, as investors monitor the coronavirus pandemic closely in the US. Even Friday’s promising US data did not manage to lift the greenback out of what has now become the longest weekly run of declines in a decade. Market commentators are now starting to discuss an economic divide between the US and Europe, as Europe carries on recovering from COVID, the US shows no sign of slowing down.

Data wise, we are in for a quiet week in the US. The only major release coming on Wednesday in the form of FOMC minutes, any suggestion of yield curve control will be negative for the dollar. Saturday was supposed to bring us the 6 month review of US – China trade talks but this has been delayed because of scheduling conflicts with the annual Beidaihe meeting, where top Chinese leadership discuss key political issues and no new date has been set.

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