Update -

Treasury Market Commentary

A weekly economic update from our Treasury team.

Published

23rd July 2021

Category

Macro Commentary

Growing concerns on the economic fallout from the spread of the Delta variant are weighing heavily on market sentiment, driving the dollar higher and hitting global equity markets.

UK virus rates and hospitalisations will be analysed closely over the coming weeks to see what impact the further lifting of restrictions is having, with the outlook remaining highly uncertain.

The government’s budget deficit fell to £22.8bn in June as the economy began to reopen, however interest payments jumped to a record £8.7bn.

In the US, the dollar continues to benefit from a general flight to safety, driven by the virus, tensions with China, and ongoing volatility in the fixed income markets.

Whilst in Europe, the ECB adjusted its forward guidance at yesterday’s meeting as expected, and following its recent policy review, it has room to allow inflation to overshoot its new 2% inflation target.

On the exchanges, summer trading markets mean a lack of real liquidity, and very low conviction on growing risk concerns against such an uncertain outlook.

GBP/USD dropped from 1.3900 down to 1.3600, near its year-to-date lows, as the dollar strengthened across the board on the growing risk-off sentiment. We expect strong buying interest ahead of the technically important 1.3500 level.

GBP/EUR has eased lower on some general sterling weakness but remains well supported at the significant 1.1500 level.

GBP/USD – 1-year chart

Week Ahead

Date

Release

Last

Expected*

28/7/21

US FOMC (Lower Bound Rate)

0.0%

0.0%

29/7/21

UK Mortgage Approvals

87.5k

n/a

29/7/21

US GDP Annualised QoQ

6.4%

8.1%

30/7/21

EU CPI Estimate YoY

1.9%

n/a

*Bloomberg survey / Not available

Foreign Exchange

Currency

Last

Currency

Last

EUR/USD

1.1765

USD/JPY

110.35

GBP/USD

1.3735

AUD/USD

0.7365

GBP/EUR

1.1670

GBP/AED

5.0480

USD/CHF

0.9205

XAU/USD

1807

Equity Indices

Indices

Previous Close

YTD % Change

FTSE 100

7012

+8.55%

S&P

4378

+16.28%

EUROSTOXX

4077

+14.76%

UK Benchmark Rates

Libor

 

Swap Mid (SONIA) ss((SONIA)

 

3 month

0.07363%

2 year

+0.43%

12 month

0.18788%

5 year

+0.67%


View Arbuthnot Latham’s Private and Commercial deposit rates.

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