GB Pound
Sterling advanced against major rivals, supported by positive data releases.
Movements
GBPUSD opened at 1.3539 and moved steadily higher during the week, hitting a 1-month high of 1.3644 and closing with a gain of 0.69% at 1.3633.
GBPEUR opened at 1.1940 and timidly started to move up on Monday, reaching 1.1968. It then erased this gain on Tuesday before resuming the uptrend during the second part of the week, to close at 1.1994 (+0.45%).
Movement rationale
Sterling continues to be buoyed by a positive economic outlook and expectations of further hikes by the BoE, holding up relatively well in the face of rising geopolitical tension that has engulfed global markets. Positive data was released during the week, starting with December’s unemployment rate remaining at 4.1%, but wage growth was stronger than expected at 4.3%, maintaining the pressure on the central bank to hike rates again at next month's meeting. To reinforce the case for the BoE to tighten further, UK inflation published Wednesday, was the highest rate in 30 years at 5.5%. Retail sales data (Friday) was also upbeat, rising 1.9% in January, cumulating to a jump of 9.1% on the year, mainly driven by spending on household goods.
Week ahead
A light economic calendar will maintain the focus on geopolitical tension and policymakers’ comments for further hints on the BoE rates hike path.
Calendar
Monday 9:30am | Markit Services PMI (Feb).
Friday 7am | GfK Consumer Confidence (Feb) .
US Dollar
The Dollar was mixed amid geopolitical uncertainty.
Movements
EURUSD opened at 1.1338 and moved throughout the week in a defined range (1.1290-1.1390) to close slightly higher at 1.1365 (+0.24%).
GBPUSD opened at 1.3539 and moved steadily higher during the week, hitting a 1-month high of 1.3644 and closing with a gain of 0.69% at 1.3633.
Movement rationale
The Dollar remains highly sensitive to risk sentiment impacted by geopolitical tensions, causing the currency to react to any news of escalation and de-escalation in the Ukraine-Russia confrontation. Headlines at the beginning of the week of the build-up of Russian forces near the Ukraine border have increased the potential for military intervention, dampening global risk appetite and supporting the Greenback. However, as concern regarding Russia/Ukraine eased later in the week, investor appeal for the safe-haven US dollar diminished. This, coupled with less hawkish than expected minutes from the Federal Open Market Committee (stating that decisions on rate hike would be data-dependent and will be made on a meeting-by-meeting basis) triggered some USD depreciation against both the GBP and EUR. In terms of economic data, US retail sales posted solid 3.8% annualised growth in January, the most in 10 months, showing underlying strength in the economy ahead of an anticipated March interest rate increase.
Week ahead
In addition to risk sentiment, which remains a key driver for USD, investors will pay attention to Friday’s Durable Good data.
Calendar
Tuesday 3pm | Consumer Confidence (Feb), Markit PMI Composite (Feb).
Thursday 1:30pm | Gross Domestic Product (Q4), Initial Jobless Claims (Feb 18).
Friday 1:30pm | Durable Goods Orders (Jan), Michigan Consumer Sentiment Index (Feb).
Euro
The Euro remains volatile.
Movements
EURUSD opened at 1.1338 and moved throughout the week in a defined range (1.1290-1.1390) to close slightly higher at 1.1365 (+0.24%).
GBPEUR opened at 1.1940 and timidly started to move up on Monday, reaching 1.1968. It then erased this gain on Tuesday before resuming the uptrend during the second part of the week, to close at 1.1994 (+0.45%).
Movement rationale
We’ve now seen two successive volatile weeks for the Euro, as the currency is driven (and supported) by hints of an interest rate hike. However, growing concerns over the Ukraine-Russia conflict have hindered Euro gains, with news from there likely to be the main driver of future Euro movement, unless the ECB provides more clarity on its plan to raise interest rates. So far, the Central Bank remains cautious, with President Lagarde taking some of the recent steam out of the Euro by stating that a gradual shift in monetary policy is needed. Economic releases in the bloc were mixed, with German economic sentiment and Eurozone consumer confidence in February dampened by inflation and Ukraine tensions, whilst industrial production rose in December.
Week ahead
Uncertainty over the Ukraine-Russia crisis and additional ECB’s comments will likely be the main driver for the Euro:
Calendar
Monday 9am | Markit PMI Composite (Feb).
Tuesday 9am | German IFO – Business Climate (Feb).
Friday 10am | Business Climate (Feb).
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