The pound started the week by moving sideways against the dollar, before gaining enough traction to send it to a 10-day high – rising to the 1.38 level for the first time since 16 July. The upward movement for the UK currency came despite it remaining on course for its first back-to-back monthly declines versus the dollar since March 2020 – when the coronavirus became a pandemic, triggering turbulence in markets worldwide.
The pound was buoyed by data that revealed new Covid cases in Britain had fallen for five consecutive days for the first time since February. The UK currency has been supported by Britain’s high vaccination rate amid the spread of the Delta variant, which has caused Covid cases to surge globally.
However, medical experts cautioned that it is too early to tell the full impact of the nation’s economic reopening on infection rates. More time must pass before data can reflect the removal of most Covid restrictions earlier this month, while hundreds of thousands of people have been self-isolating after being told to isolate by the Covid app.
Dollar softens as attention turns to Fed
The dollar slipped lower on Monday as investors turned their attention to this week’s Federal Reserve meeting and cryptocurrencies surged to their highest levels in weeks. Before the Fed meeting minutes are shared on Wednesday, the first notable data set was released from the US economy yesterday.
Sales of new single-family homes in the US nosedived last month and sales in May were weaker than initially forecast – both signals that the US housing market was losing momentum amid rising prices that are being fuelled by a serious shortage of properties.
According to figures released by the Commerce Department on Monday, new home sales fell 6.6% to a seasonally adjusted annual rate of 676,000 units in June. The pace of sales in May was revised down to 724,000 units from 769,000 units. Economists had forecast that sales would increase 3% to a rate of 800,000 units last month.
The first release from the UK economy this week arrives overnight in the shape of the British Retail Consortium Shop Price Index – a measure of price changes in popular retail outlets in the UK.
Several notable economic indicators are scheduled for release from the US economy today: Durable Goods Orders, Housing Price Index, and Consumer Confidence.
The focus for market participants this week is the minutes from the Federal Open Market Committee (FOMC) July meeting, which are released on Wednesday, with their contents providing clues on the timing of stimulus tapering. Analysts expect the FOMC to drop ‘substantial’ from ‘substantial further progress’ in its guidance on the required conditions for the labour market before removing monetary support. Such action would indicate the FOMC believes it will soon be appropriate to taper asset purchases.