Sterling struggled to hold on to minimal gains today as the currency managed to hold firmly above 1.6580 for most of the day in what was a relatively quiet trading session. The contrasting fortunes of the US and Europe have seen the pound slip off of the year-to-date highs seen in early July with the currency losing 0.85% against the dollar this week as sterling weakened for a seventh consecutive week against the dollar testing the 50 week simple moving average at one point. With investors looking ahead to a packed week of US economic data we could see further weakness in the pound against the dollar as stronger signs of US economic growth put additional pressure on GBP.
Global equity markets faced broad selling pressure on Friday as investors took profits on flaring geopolitical tensions. European benchmark equity indices had found tentative support around yesterday’s close but as news of Russia’s aid convoy crossing into Ukraine broke, stocks across the region pared some of the weekly gains. Wall Street opened on the back foot with both the S&P 500 and DJIA swinging between gains and losses on a combination of rising geopolitical tensions and anticipation of Yellen’s speech at Jackson Hole.
Both the yen and Swiss franc rallied higher on the renewed tensions in Ukraine, with the yen pulling back towards 103.50 against the dollar after losing considerable ground against the greenback throughout the week. The currency edged back to 103.90 however, bringing weekly losses to just over 1.6% against the dollar at the time of writing. The Swiss franc strengthened towards 0.9140 against the dollar before pulling back slightly towards 0.9120 as investors sought out safe haven assets.
Trading in USD has been relatively mute ahead of Yellen’s speech, with details emerging that the Fed chair has shifted her stance on the labour market. Comments made by Yellen at Jackson hole indicate a more neutral viewpoint on the amount of spare capacity in the labour markets, hinting at the possibility of a rate rise earlier than previously expected. Investors will continue to assess macro data releases in the coming week for any further insight into Fed thinking.