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Weekly FX Outlook October 19th



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GB Pound

Sterling had a relatively volatile week.

Movements

GBPUSD was volatile, starting the week at 1.3040 and trading lower to reach 1.2860 on early Wednesday. It then briefly spiked up to 1.3060 before retracing once more and closing at 1.2975, with a weekly loss of 0.50%.

GBPEUR opened at 1.1038 and traded in a tight range (1.0990-1.1080) to close little changed at 1.1070 (+0.29%).

Movement rationale

Sterling remained highly sensitive to Brexit headlines and traded lower overall amid an increasing likelihood of a no-deal scenario. After a quiet start of the week GBP came under pressure on Tuesday as the October 15th deadline approached with no breakthrough in negotiation. The currency then appreciated sharply on Wednesday on fresh news that UK would stick with talks beyond the self-imposed deadline, before resuming the downtrend toward the end of the week as PM Johnson affirmed that the UK should prepare for a no-deal Brexit. Friday also saw UK credit rating downgraded by Moody’s one notch to Aa3.

Week ahead

Developments surrounding Brexit could provoke further GBP volatility, with the following main events also having the potential to influence the markets:

Calendar

Wednesday 7am | Consumer Price Index (Sep)

Friday 7am | Retail Sales (Sep), Markit Services PMI (Oct)

US Dollar

The US Dollar had a positive week.

Movements

EURUSD opened at 1.1813 and gradually moved lower to close the week down 0.79% at 1.1719 (+0.65%).

GBPUSD was volatile, starting the week at 1.3040 and trading lower to reach 1.2860 on early Wednesday. It then briefly spiked up to 1.3060 before retracing once more and closing at 1.2975, with a weekly loss of 0.50%.

Movement rationale

The Dollar regained some lost ground last week as risk-on sentiment deteriorated on the back of news that a vaccine study was paused due to an unexplained illness in a participant as well as an impasse in US stimulus package. Prospects of securing a deal before the November election seem to have faded over the last week. On the US economy front, jobless claims were higher than expected, adding to concerns.

Week ahead

USD is expected to have a relatively volatile week ahead, with the following main events having the potential to influence the markets:

Calendar

Thursday 1:30pm | Initial Jobless Claims (Oct 16)

Friday 2:45pm | Markit PMI Composite (Oct)


Euro

The Euro had a relatively quiet week.

Movements

EURUSD opened at 1.1813 and gradually moved lower to close the week with a negative move of 0.79% at 1.1719 (+0.65%).

GBPEUR opened at 1.1038 and traded in a tight range (1.0990-1.1080) to close little changed at 1.1070 (+0.29%).

Movement rationale

The European currency showed limited attention to rising coronavirus infections and fresh government restrictions on people’s movement that risk hampering the region’s recovery. Germany, France, Italy, Spain and the Netherlands have all announced new measures aiming to counteract the recent spikes in Covid-19 infections, raising predictions that the Eurozone economy could slide back into recession. Eurozone Industrial production data revealed a sharp slowdown in August, driven by an unexpected decline in Germany’s figures. The impasse in Brexit negotiations also weighed on the single currency, although with a lower sensitivity than Sterling.

Week ahead

The Eurozone economic data calendar includes the following:

Calendar

Thursday 3pm | Consumer Confidence (Oct)

Friday 9am | Markit PMI Composite (Oct)


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