Key Updates for August 22nd
As we head into Friday, the US Dollar (USD) is showing strong resilience against other currencies, building on notable gains from Thursday. Later today, Federal Reserve Chair Jerome Powell is set to speak on the “Economic Outlook and Framework Review” at the annual Jackson Hole Economic Policy Symposium organized by the Kansas City Fed.
This Week’s Dollar Performance
The following table summarizes the US dollar’s performance against major currencies this week, highlighting its strength, especially compared to the New Zealand dollar.
| Currency | USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|---|
| USD | 1.00% | 1.09% | 0.88% | 0.70% | 1.39% | 2.01% | 0.45% | |
| EUR | -1.00% | 0.09% | -0.14% | -0.29% | 0.41% | 0.97% | -0.54% | |
| GBP | -1.09% | -0.09% | -0.32% | -0.37% | 0.32% | 0.89% | -0.67% | |
| JPY | -0.88% | 0.14% | 0.32% | -0.15% | 0.54% | 1.15% | -0.41% | |
| CAD | -0.70% | 0.29% | 0.37% | 0.15% | 0.66% | 1.30% | -0.29% | |
| AUD | -1.39% | -0.41% | -0.32% | -0.54% | -0.66% | 0.56% | -0.98% | |
| NZD | -2.01% | -0.97% | -0.89% | -1.15% | -1.30% | -0.56% | -1.56% | |
| CHF | -0.45% | 0.54% | 0.67% | 0.41% | 0.29% | 0.98% |
This heatmap illustrates the percentage change in major currencies against each other. You can see how the USD performed compared to the JPY, for instance, by looking at their interaction in the table.
On Thursday, the USD gained momentum after the August S&P Global Purchasing Manager Index (PMI) revealed that economic activity in the private sector picked up more than anticipated. Manufacturing PMI climbed from 49.8 in July to 53.3, while the service PMI reached 55.4, surpassing expectations of 54.2. As a result, the USD index increased by approximately 0.4% on Thursday and continued its ascent into Friday, trading at 98.75, marking an 11-day high and nearly a 1% rise over the past week. However, US stock index futures are predicted to fall between 0.2% and 0.6% this morning in Europe after Wall Street’s major indicators closed negatively on Thursday.
Currency Insights
USD/CAD: In early European trading, the USD/CAD has reached a new three-month high, surpassing 1.3900. Markets are awaiting Statistics Canada’s July retail sales data next week.
EUR/USD: This pair is currently under moderate selling pressure, trading below 1.1600. It fell about 0.4% on Thursday, heavily influenced by the USD’s strength.
GBP/USD: The GBP/USD decreased by 0.3% on Thursday, marking the fourth consecutive day of losses. It remains sluggish in the European morning, testing the 1.3400 mark.
Gold, after a brief rebound on Wednesday, is losing ground again, with recent declines recorded on Thursday. This follows the rise in 10-year US Treasury bond yields, which was propelled by positive US PMI data. Currently, XAU/USD is down, trading near $3,330 in European sessions.
USD/JPY: This pair gained bullish traction, rising more than 0.7% on Thursday. As it holds position, it trades at a fresh three-week high close to 148.50.
Pound Sterling Insights
Pound Sterling FAQ
Pound Sterling (GBP) is the world’s oldest currency, originating in 886 AD, and serves as the official currency of Britain. In 2022, it was the fourth most traded currency in Forex, comprising 12% of global transactions, with a daily volume averaging $630 billion. Its main pairs include GBP/USD, often nicknamed “cable,” which represents 11% of Forex, and GBP/JPY, known as “dragon,” accounting for 3%.
The primary determinant of the pound’s value is monetary policy from the Bank of England (BOE). The BOE aims for “price stability,” targeting inflation around 2%. Adjustments to interest rates are the main strategy for managing this. High inflation may prompt rate hikes to control spending, making GBP more attractive to investors.
Economic data, including GDP and PMI figures, shape the GBP’s value. A robust economy typically boosts GBP’s attractiveness, while poor economic indicators can weaken it.
Furthermore, the trade balance impacts the pound. A positive trade balance, where exports exceed imports, generally strengthens the currency as it reflects strong demand from foreign buyers.
