GB Pound
The pound has held onto relative strength despite hotter-than-expected UK inflation data brings fears of a long-lasting recession.
Movements
GBPUSD started the week at 1.1811 before shedding 0.7% on Monday. On Tuesday losses were reversed with the pair briefly reaching a 3-month high at 1.2028. The 0.4% gained on Wednesday was fully retraced on Thursday before trading rangebound going into the weekend. The pair closed the week broadly unchanged at 1.1819.
GBPEUR opened at 1.1429 closing back beneath 1.14 on Monday. On Tuesday the pair appreciated 0.7% to 1.148. After muted price action on Wednesday and Thursday’s session, Sterling rallied half a percent on Friday to close above 1.15. The pair ended the week at 1.1522 for a weekly gain of 0.81%.
Movement rationale
The Pound had a poor start to last week suffering losses against USD and EUR on Monday. On Tuesday’s session, Cable reversed the previous day’s price action as markets prepared for the busy midweek calendar in the UK. While Tuesday’s unemployment data failed to surprise market participants (3.6% in Oct), Cable briefly broke 1.20 (a level not touched since August 18th) as the Dollar sold off. On Wednesday, UK CPI touched a new 4 decade high once again beating the consensus (11.1% V 10.7%). In comparison to the US’s cooler print the week before, the Dollar faces a downside risk if the inflation differential between the US and UK continues to widen. On Thursday, Chancellor Jeremy Hunt unveiled the long-awaited Autumn statement consisting of short-term tax hikes and medium-term spending cuts to plug the £55bn hole. Despite Hunt quoting the OBR’s deeply negative growth forecasts for 2023 (-1.4%), currency markets were relatively muted. GBPUSD shed 0.3% and GBPEUR oscillated around 1.14. Finally, on Friday Cable traded rangebound to go into the weekend unchanged.
Week ahead
Markets will continue to digest the details of the Autumn fiscal statement going into this week.
Calendar
Wednesday 9.30am | PMI 12.45pm | Autumn Forecast Statement
Thursday | BoE member speeches
US Dollar
The Dollar reached a 3-month low against GBP after signs of US inflation cooling.
Movements
EURUSD opened the week at 1.0334 before making small losses on Monday. On Tuesday and Wednesday, the single currency struggled to consolidate above 1.04. In the latter half of the week EURUSD dropped 0.6% between Thursday and Friday to close the week at 1.0258 for a weekly loss of -0.74%.
GBPUSD started the week at 1.1811 before shedding 0.7% on Monday. On Tuesday losses were reversed with the pair briefly reaching a 3-month high at 1.2028. The 0.4% gained on Wednesday was fully retraced on Thursday before trading rangebound going into the weekend. The pair closed the week broadly unchanged at 1.1819.
Movement rationale
Markets were keen to hear from the numerous Fed speeches last week following the lower-than-expected inflation print from the week before. Waller reminded markets that one data point is not indicative of a downward trend and the notoriously hawkish Bullard reiterated his belief that a terminal rate of 5.25% is too low. Nevertheless, markets lowered their forecasts for the December meeting to a 50bp base case. The prospect of slower rate hikes caused the Greenback to touch multi-month lows against Sterling. The improved risk appetite also benefitted EURUSD which touched highs not seen since July (1.048). Even the robust retail sales data on Wednesday (1.3% in Oct V 0% in Sep) failed to support the Greenback. In the latter half of the week, a shift in risk sentiment caused EURUSD to trace back from the multi-month highs.
Week ahead
Markets will be eager to use the FOMC minutes as a guide for the magnitude of December’s interest rate hike.
Calendar
Wednesday 1.30pm | Durable Goods (Oct) 2.45pm | PMI 7pm | FOMC minutes
Euro
Euro price action last week can be largely attributed to changes in risk appetite.
Movements
EURUSD opened the week at 1.0334 before making small losses on Monday. On Tuesday and Wednesday the single currency struggled to consolidate above 1.04. In the latter half of the week EURUSD dropped 0.6% between Thursday and Friday to close the week at 1.0258 for a weekly loss of -0.74%.
GBPEUR opened at 1.1429 closing back beneath 1.14 on Monday. On Tuesday the pair appreciated 0.7% to 1.148. After muted price action on Wednesday and Thursday’s session, Sterling rallied half a percent on Friday to close above 1.15. The pair ended the week at 1.1522 for a weekly gain of 0.81%.
Movement rationale
The Euro started last week gaining 0.4% on the Pound in Monday’s session as markets looked ahead to economic growth data on Tuesday. While the preliminary Q3 figures failed to surprise markets (2.1% Vs 2.1% consensus), EURUSD was supported by the data, causing the pair to appreciate to 1.048 (a 4-month high). EURUSD price action on Tuesday was also dictated by news that a Russian rocket hit NATO member Poland. Subsequent comments by Biden pushing back against Zelensky’s confirmation that the missile came from Russia, lead to further support for the Euro. Midweek UK inflation and fiscal statement caused GBPEUR to trade rangebound. In the latter half of the week, weaker risk appetite weighed on the single currency despite an agreement on Ukrainian grain transportation brokered by Turkey’s Erdogan and the UN. Nevertheless, EURUSD spent Friday trading below 1.04 on the back of Hawkish Fed comments.
Week ahead
Speeches from ECB members this week may give insight into the path of monetary policy going into next year.
Calendar
Tuesday 3pm | Consumer Confidence (Nov)
Wednesday 9am | PMI
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