The Difference in Performance of The Pound: From August to September
Have you ever consider investing in the foreign exchange (forex) market? Forex is one of the most liquid and actively traded financial instruments in the world, and can present investors with attractive opportunities to profit.
However, though currency price movements can be profitable, they also pose the risk of losses. To reduce the risk of losing your capital, you can take part in forex trading on platforms like Plus500, where you can speculate on price movements in the market through contracts for difference, and use risk management tools to cap your losses.
If you already have a position in the forex market, you’ll be aware of the levels of volatility that can occur, causing prices to move significantly in a short period of time. As a result, the landscape of the market can change dramatically from month to month. In this article, we will look at how the value of the Great British pound (GBP) — one of the most actively traded currencies — has changed from August to September 2021.
The value of the pound in August
The pound made some progress in August, making gains over the euro, spurred by the continual economic progress that had been afforded by the successful rollout of the coronavirus vaccine. In the previous month, the UK lifted all coronavirus restrictions, reopening the last sectors within the economy, which had been unable to function for more than 12 months.
The easing of restrictions was positively received by the majority of the UK public, but cautiously received by traders, who turned to the US dollar (USD) as a safe haven, as the GBP fell to its lowest levels since February 2021.
In mid-August, the number of people in England testing positive for coronavirus experienced a decline, with the Office for National Statistics (ONS) estimating that 698,100 people had COVID-19 in the week ending 14th August 2021.
This, along with the increase of the central bank’s inflation forecasts (which favourably matched predictions made by experts) can be somewhat attributed to the pound’s increase in value in August.
The value of the pound in September
The overarching trend in September is that the pound is weakening. This is based upon investor’s concerns about the reduced momentum of economic growth worldwide, and spurred by the emergence and spread of the COVID-19 Delta variant.
UK’s transmission of the virus is increasing at an alarming rate, with children returning to school and more mass gatherings taking place, such as concerts and festivals. This month, retail sales have declined for a fourth consecutive month, which is likely because of a change in spending habits, seeing more people turn to shopping online. Additionally, the inflation rate in the UK has increased to a level that is almost reaching a nine-year high, which is likely to have a detrimental effect on trader’s pessimistic approach towards the GBP.
This month, the government have released a booster shot plan, which will be administered to all adults over 50 across the UK, to provide additional protection from the virus. This will hopefully help to get the surge in cases under control, increasing the optimism for the recovery of the UK’s economy and seeing the pound rise in value.
Gross domestic product (GDP) is a key indicator of the health of a country’s economy. It details the value of a nation’s goods and services within a specific period of time. In the second quarter of this year, the UK’s GDP was 4.4% below pre-pandemic levels.
Going into the fourth quarter of this year, economists remain optimistic that the UK will recover to pre-pandemic levels. As the value of the pound is directly impacted by the health of the UK’s economy, this could have a positive effect on the currency.
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