GB Pound
Sterling reversed its recent downtrend and rebounded against most majors.
Movements
GBPUSD started the week at 1.073 dropping 1.5% to 1.038 on Monday. Cable then recovered posting consecutive gains for the rest of the week. On Thursday the pair regained 1.11 and Friday saw the pair touch above 1.12 to close the week at 1.1202 for a weekly gain of 4.4%.
GBPEUR opened at 1.1078 dropping briefly to a low of 1.08 on Monday. On Tuesday and Wednesday the pair stabilised around 1.11-1.12. In the latter half of the week, Sterling rallied above 1.14 to close the week at 1.1421 for a weekly gain of 3.1%.
Movement rationale
Sterling underperformed in Monday’s session as markets continued to digest the details of Kwasi Kwarteng’s mini budget from the week before. GBPUSD was particularly volatile, trading from 1.093 to 1.038. Forward markets even priced in a 40% chance of Cable hitting parity by year-end. Away from FX, UK gilt markets last week were particularly turbulent (30-year yield touched a 20-year high). The BoE eventually intervened by purchasing gilts at an “urgent pace” to “orderly restore market conditions”. Consequently, the market regained some confidence in the UK currency, with Sterling staging a midweek recovery against the Greenback. GBP gained 1.5% on Wednesday and 2% on Thursday as markets increased the likelihood of an inter-meeting emergency hike (175bp rate increase now forecasted by November meeting). Q2 GDP data on Friday (4.4%) surprised to the upside, giving further support to the Pound. GBPEUR touched a high of 1.142 on the back of the announcement.
Week ahead
A quiet economic calendar could mean a return to the sterling downtrend.
Calendar
Monday 9.30am | PMI
US Dollar
The Dollar suffered losses against most majors last week. However, the outlook for the Greenback is still positive.
Movements
EURUSD opened the week at 0.968, shedding 0.8% on Monday to a low of 0.956. Wednesday’s session saw an improvement of risk appetite, causing EURUSD to regain 0.97. The pair spent the latter half of the week trading around 0.98 closing at 0.9807, a 1.27% weekly gain.
GBPUSD started the week at 1.073 dropping 1.5% to 1.038 on Monday. Cable recovered posting consecutive gains for the rest of the week. On Thursday the pair regained 1.11 and Friday saw the pair touch above 1.12 to close the week at 1.1202 for a weekly gain of 4.4%.
Movement rationale
On Monday, Cable initially dropped 4.5% to a new record low (1.035) before recovering later in the session. On Tuesday a slight miss in durable goods (-0.2% vs -0.1% consensus) did little to move currency markets. EURUSD traded around a multi-decade low on Tuesday before staging a comeback in the latter half of the week. The pair gained 2% between Wednesday and Thursday finding resistance at 0.98. Despite Q2 GDP data in line with expectations (-0.6%), the confirmation of negative growth caused a lull in the Dollar’s recent rally. DXY posted the first negative week in the last 3 weeks. Finally, as Q3 drew to a close oil posted the first quarter of losses since 2020, and the S&P tracked to 2020 lows.
Week ahead
All eyes look toward the OPEC+ meeting on Wednesday for details of supply cuts.
Calendar
Tuesday 3pm | PMI
Wednesday 9am | OPEC meeting
Friday 1.30pm | Nonfarm Payrolls
Euro
The Euro reversed some of its losses against the Dollar. However, GBPEUR gained significantly.
Movements
EURUSD opened the week at 0.968, shedding 0.8% on Monday to a low of 0.956. Wednesday’s session saw an improvement of risk appetite, causing EURUSD to regain 0.97. The pair spent the latter half of the week trading around 0.98 closing at 0.9807, a 1.27% weekly gain.
GBPEUR opened at 1.1078 dropping briefly to a low of 1.08 on Monday. On Tuesday and Wednesday the pair stabilised around 1.11-1.12. In the latter half of the week, Sterling rallied above 1.14 to close the week at 1.1421 for a weekly gain of 3.1%.
Movement rationale
Results from the Italian election on Monday caused a mixed bag of Euro performance. While the far-right Meloni win caused EURUSD to drop 0.8% the single currency gained 0.7% on Sterling. On Tuesday, further Russian escalation caused uncertainty in Euro demand, shifting risk appetite. Following the “sabotaged” Nord stream leaks last week, there have been numerous reports from Norwegian gas fields that unidentified drones have been flying overhead. Risk appetite improved on Wednesday causing a 1.5% gain in EURUSD. On Thursday, Sterling recovered from lows against the Euro as markets looked ahead toward the European inflation print on Friday. Preliminary HICP continued to increase in September (4.8% vs 4.3% in August). Alongside this, Germany announced a 200bn cap on Gas prices which will likely further add to European inflation over the coming months. The Euro fell against GBP and USD on the back of the announcement.
Week ahead
Volatility may arise in the first half of the week as markets continue to digest the details of Germany’s energy cap.
Calendar
Wednesday 9am | PMI
Thursday 10am | Retail Sales
Friday | EU leaders summit
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